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Alan
87 Posts |
 Posted - 17 Dec 2004 : 17:04:42
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The Benefits of ESOPs and Ownership Culture
The focus on ESOPs in companies is changing from “how much” to “how well” as an interesting by product of the recent changes to international financial accounting rules. These changes are driving a need to look at ESOPs not as a “cost” to the business but as an “investment” in the business. There is a growing emphasis being placed on defining the benefits of ESOPs so that shareholders can be better informed about what “added value” ESOPs are bringing to the business.
Companies should not only declare "costs" of the schemes to shareholders (including legal and administrative costs - as they have to under the new rules), but also disclose the "benefits" - after all if it is costing the shareholders an identified amount for these schemes, shouldn't they be able to ask what they are getting for it, ie: some "value for money" indication? This pushes the issue of evaluating ESOPs onto the agenda, to see whether such Plans are achieving what it was forecast that they would achieve.
For many companies, ESOPs are a way to attract, retain and motivate employees, providing both cost savings and increased productivity. From the evaluation perspective, there are three measures of benefit that could be presented if a company says that it expects to increase staff retention, attract better employees and improve motivation as a result of establishing an ESOP:
(i) The often quoted "costs of staff turnover" to companies is put forward as a reason for needing an ESOP, but are these costs going down as a result of the introduction of the ESOP? Shareholders can ask "how much has the employee share ownership plan reduced staff turnover". This should be readily presentable on available data from HR.
(ii) On those aspects of motivation, staff quality and staff satisfaction - many research studies attribute ESOPs with increases in productivity which are all linked to these aspects. What evidence is there being presented to show that this is the case in any particular company? There could be an identifiable link between consistent improvements in performance, the level of employee ownership as a proportion of total capital and work done to increase "ownership culture". The key issues to look at would be "growth" in employee ownership through the "stake" they have in the business (is it growing, and at what rate), the employee satisfaction rates with the plan and whether there is a "strong ownership culture" in the business (as identified through "ownership culture surveys" which are common in the US).
(iii) On the issue of attracting quality people, you could do this by measuring how many job applicants you have per job compared to peers and by asking potential employees to rate the importance of various benefits
etc.
(Information on these measures has come from the National Centre for Employee Ownership in the US – see www.nceo.org).
I think shareholders may also want to know what programs are in place to improve "Partnership at Work" processes, including structures to ensure that employees are no longer "outsiders" in the corporate governance process and what workplace participation structures there are which contribute to a happier and more harmonious – and therefore more productive – workplace.
Such evaluation and accountability processes for the "costs and benefits" of ESOPs should increase the "quality and standards" of ESOPs. It should also increase the "saleability" of ESOPs as an important avenue for increasing shareholder wealth. The managers of ESOP schemes in companies need to have some accountabilities in place to ensure the ESOPs perform to expectations. What we hear about ESOPs sometimes is mere window dressing. Of course, the idea of any real empowerment of ordinary employees in workplaces across the nation can be quite threatening to existing organisational arrangements and cultures, though when it works, people genuinely welcome the idea of employees taking on new roles – including the entrepreneurial one!
On the evaluation of “Ownership Culture” and assessment of its improvement, I would recommend looking at the Survey process offered by Ownership Associates in the US. The URL for this is:
http://www.ownershipassociates.com/ocs_content.shtm
For the whole process of employee ownership training, I would take a look at the program offered by the Ohio Employee Ownership Centre in the US. The URL for that is:
http://dept.kent.edu/oeoc/EOTrainingDevelopment/EOTrainingDevelopment.htm
I would be interested in whether anybody knows of similar programs operating in Australia.
Thanks.
Alan Greig
AEOA
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Alan
87 Posts |
Posted - 11 Apr 2006 : 03:58:12
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For all the latest on-line research articles, surveys and consulting services on all aspects of "Ownership Culture" and its benefits, see the new web-page that the US National Centre for Employee Ownership has available at:
http://www.nceo.org/culture/index.html
OWNERSHIP CULTURE: BUILDING A STRONGER COMPANY THROUGH EMPLOYEE INVOLVEMENT
Research indicates that employee ownership companies grow faster than they would have been expected to grow without employee ownership and that they are more stable than their counterparts. Many studies have found that employee ownership affects corporate performance only when combined with initiatives that create an environment in which employees are given the tools, training, and opportunities to take more active roles as owners--in other words, only when the company creates an "ownership culture."
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admin
632 Posts |
Posted - 09 Dec 2006 : 13:19:28
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Creating and maintaining an ownership culture requires meaningful employee involvement in work-level issues.
Research has consistently shown that companies that use employee ownership to create "ownership cultures" for all their workers, rather than just make executives wealthier, perform substantially better than their peers. The techniques for doing this vary widely, but, at their core, share the common principles of open-book management and involving employees in day-to-day work decisions (often through teams) as much as possible. The explanation below outlines the typical elements found in ownership cultures, although the mix of these elements varies considerably.
Best practices for creating ownership cultures include the following:
a. Sharing financial information with all employees in a variety of ways, such as:
o Sharing income statements and balance sheets, or summary versions of these designed to communicate the relevant numbers employees can actually affect.
o Sharing other performance measurements that track corporate financial objectives and critical performance numbers.
o Sharing performance measures for work groups, teams, or other operational units.
o Sharing strategic goals.
o Creating financial literacy vehicles that clearly link individual performance to value.
b. Providing employees with at least basic training to understand essential financial and performance measurements.
c. Providing employees with at least basic information and learning opportunities for how to plan for their own financial security.
d. Creating opportunities for employee involvement in work-level decisions, such as:
o Establishing work-level teams, ad hoc committees, cross-functional teams, or other opportunities for employees to regularly interact with their colleagues to have input and/or make decisions about how their jobs are organized and performed.
o Delegating authority for particular decisions so that they are based on expertise rather than formal position or strict hierarchical patterns.
o Creating formal mechanisms for employees to make suggestions and receive prompt, specific feedback.
o Evaluating which decisions should be made at which levels, with a bias toward having employees make any decisions for which they have the appropriate expertise.
e. Setting up an employee/management steering committee to help oversee participative management approaches.
f. Providing training programs to assist employees to gain additional skills to expand their job responsibilities and opportunities.
g. Allowing for periodic re-evaluations of ownership cultures, particularly through modeling after other successful ownership culture companies.
h. Using appropriate forms of sharing ownership. Research indicates that broad-based options and ESOPs can have a significant impact on performance, while ownership through other plans (particularly those driven primarily by employee investment) is generally less effective. The key here appears to be that ownership works best (if not exclusively) if it is in addition to other compensation.
These guidelines offer a set of criteria for companies to employ in pursuing the benefits of employee ownership through the establishment of "ownership cultures." Best practices in the employee ownership field are exemplified by companies that have created ownership cultures.
It is recognized that companies setting up employee ownership plans may have only just started along this path, and it would be inappropriate to judge them for not yet having reached all the objectives outlined here.
It is also recognised that different companies will emphasize different elements of the best practices described here. There is no one road to the creation of an ownership culture. Effective companies have created dozens of different tools and techniques for making ownership real, and for getting employees to think and act like owners. What matters most are the guiding principles of sharing information, structuring meaningful employee input into decisions affecting their work, and providing appropriate training to make sure employees have the skills to be effective participants. If a particular practice seems to incorporate the appropriate principles, it can help build an effective ownership culture.
For investors investing in employee ownership companies, these elements will be very powerful indicators of the likelihood of company success.
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admin
632 Posts |
Posted - 28 Jan 2007 : 10:52:28
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Creating an Ownership Culture
This is arguably the most difficult and important issue in establishing an ESOP.
The usual expectation is that ownership, on its own, will encourage employees to think and act in a way that promotes the interests of the business. Research is very clear that this is not the case. People will act the way they are treated. A true ownership culture requires regular and meaningful contributions to an ownership plan, sharing detailed financial information and teaching people to use it, and getting employees involved in day-to-day workplace decisions.
Companies that are not prepared to establish this kind of culture may still want to set up an employee ownership plan, but should think of it – and communicate it – strictly as an employee benefit plan. It has been suggested by long time ESOP advocates that these plans should be called “share appreciation plans” rather than “ownership” plans to make sure employee expectations are consistent with how the company plans to operate in future.
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admin
632 Posts |
Posted - 24 Feb 2007 : 03:18:23
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Creating the Ownership Dynamic: Contributors and Barriers
The survey results (from the 500 + plus ESOP companies that participated) confirm that the top contributors to an Ownership Dynamic are not simple practices like “more share ownership” or “less fixed pay”. The reported top barriers are equally complex. All suggest that an ownership culture is the result of multiple factors: the balance of shared investment, information and influence.
Survey participants were asked to rank order, from the list below, the top three contributors to employees acting like owners. The table below shows each of the factors that were ranked as contributors, and the percentage of respondents who ranked each of these factors accordingly.
The Top Three Contributors to Employees Acting Like Owners
Factors - Percentage of companies
Commitment/loyalty to organisation - 44%
Sharing business information - 39%
Support from senior executives - 36%
Understanding your organisation - 34%
Understanding the ESOP - 27%
Support from middle management - 25%
Messages conveyed by program/culture - 23%
Understanding the industry - 19%
Concern for individual financial security - 18%
Administration of the ESOP - 8%
Implementation of the ESOP outside the US - 4%
The top three barriers to ownership behaviour cited by these companies were also not simple conditions that could be solved by a new program. Survey participants were asked to rank order, from the list below, the top three barriers to employees acting like owners.
Barriers to Employees Acting Like Owners
Factors - Percentage of companies
Messages conveyed by program/culture - 49%
Concern for individual financial security - 39%
Sharing business information - 37%
Understanding your organisation - 29%
Understanding the industry - 24%
Understanding the ESOP - 23%
Support from senior executives - 22%
Support from middle management - 18%
Commitment/loyalty to the organisation - 17%
Administration of the ESOP - 4%
Implementation of the ESOP outside the US - 4%
Other - 10%
From: "Unleashing the Power of Employee Ownership: Research Report", Hewitt Associates, 1998.
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admin
632 Posts |
Posted - 16 Mar 2007 : 06:30:19
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Three Versions of Ownership Culture
”At this company an ownership culture is one in which every employee wants to buy and hold company shares”.
”Ownership culture at our company means that employees earn ownership through their work. Key contributors earn the biggest slice, but everyone gets at least a symbolic piece of the action.”
”Ownership culture is about who we are . It’s having rights and responsibilities to understand what drives corporate performance and to have input into how to improve it”.
These three very different approaches dominate the employee ownership landscape. Each has its favourite tools and its deeply held assumptions. None is “right” or “wrong”, although research shows that on the last makes a major difference to organisational performance. But they do have very different consequences for the kinds of ownership plans companies favour. As employee ownership has spread to almost 40% of those employed by companies with shares, each approach takes up about one third of the sector.
Ownership as Risk
The first group emphasises the importance of skin in the game, both as a means and an end. Ownership is best expressed by employees purchasing shares, through employee stock purchase plans, 401(k) plans, or both. While these companies are happy to provide incentives for employees to do so, they would not want simply to give employees shares. The belief is that if employees make a purchase commitment, they will work harder and stay longer than they otherwise would.
Ownership as Incentive
This group sees ownership as both incentive and reward for good performance. It often follows that the best performers get the most. Top executives might get a third or more, top management and key line employees another third and the other 90% or so of the population gets the rest, either based on formula or merit. But just about everyone gets something in order to give people a reward for joining and staying with the company. The amount could be symbolic or more substantial, but it’s usually on the “it’s a really nice benefit” level. Some of these companies are deeply committed to these ideas; others just went along for the ride when it seemed like everyone was doing it.
Ownership as Touchstone
For the last group, ownership is intended to pervade everything they do. These companies mostly rely on ESOPs, but some well-known companies with broad-based options follow this path as well. Financially significant amounts of ownership for every employee are seen as essential, and companies are largely comfortable with allocating shares based on relative pay or other relatively flat criteria. They communicate about ownership frequently, share lots of financial information, and get employees involved in work-level decisions in multiple ways.
What Works?
As a group, the “ownership as touchstone” companies perform substantially better than they would have without these programs, and their employees are much better off financially. There is little research on the performance effects of employee stock purchase plans and employee ownership in 401(k) plans, partly because researchers don’t believe the ways these plans operate provide much reason to believe there will be significant gains. The middle group does show improved performance, albeit not as strong as the third group. But effective as the third group approach is, it is by far the most difficult to use, requiring a non-traditional business mind-set and a tremendous amount of commitment from top management. But then, as the leaders of the first group would say, you have to take some risks to get rewards.
From: “Employee Ownership Report”, NCEO (US), May/June 2005.
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admin
632 Posts |
Posted - 24 Mar 2007 : 11:32:04
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Survey Resources for Ownership Culture
Your company is investing time and resources in creating an ESOP or equity compensation plan, and you need a way to determine whether that investment is paying off. Do employees "get it" or are they confused? How many are motivated to work harder, and how many feel cynical? Does the share plan make them more likely to remain employed at the company? Does it make them more entrepreneurial?
The US National Centre for Employee Ownership (NCEO) offers extensively configurable employee surveys with benchmarked data to help you answer these questions. NCEO surveys measure attitudes, perceptions, and levels of understanding, so you'll know how many employees trust the plan, understand their role in creating value, and have the tools, skills, and information to act like owners. With this data, you can assess company strengths and weaknesses, measure progress over time, set concrete goals, and focus your energy where you'll get the greatest payoff.
The potential return on your investment in ownership, according to decades of research, is substantial: unique characteristics of ESOPs and equity compensation plans give many companies a competitive advantage; the NCEO surveys are specifically designed for companies with ESOPs and other employee share plans, including share options, share purchase plans, and restricted shares.
Originally developed by Ownership Associates (a consulting firm in Cambridge, Massachusetts) and leading academic researchers, the NCEO's employee surveys have been carefully developed and fully tested. The comparison data is drawn from over 35 companies that vary significantly in terms of size, sector, age of plan, and plan design features.
Survey Content
The NCEO's employee surveys draw from a variety of sources, including academic research, public opinion research, and, primarily, its own proprietary survey items. Companies are welcome to select the survey questions most useful to them, and the NCEO project director for surveys can help companies choose the mix of items to maximize their benefit from the survey.
Survey items are available on the following topics:
• ESOP Understanding
• Equity Compensation Understanding (stock options, restricted stock, etc.)
• Entrepreneurship
• Information and Learning
• Trust in Leadership
• Organizational Fairness
• Work Atmosphere
• Decision Making
• Organizational Effectiveness
• Accountability
• Work and Pay
• Aspects of Ownership
• Employer-Employee Relations
Companies also have the option of starting with a pre-selected survey package. Each survey package includes items from several of the topic areas above in combinations that have proven to be effective.
The ESOP Effectiveness Survey, a 24-item package, covers the most important issues for ESOP companies, from ESOP understanding and psychological ownership to satisfaction, behavioral outcomes, and participation.
The Equity Compensation Effectiveness Survey includes 26 items and addresses employee understanding of stock options, stock purchase plans, or restricted stock.
The Ownership Culture Survey is the original 65-item survey developed by Ownership Associates. It includes comprehensive measures of all key aspects of employee attitudes toward ownership.
For more on this topic and connection to the various surveys, go to: http://www.nceo.org/surveys/
Seee also "Surveys and Employee Ownership" at: http://www.ownershipassociates.com/survey.shtm .
Several Australian based consultants are introducing similar, more localised survey materials. Contact the AEOA for details.
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admin
632 Posts |
Posted - 23 Apr 2007 : 14:40:00
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Measuring and Managing Ownership Culture
The following is available form the US National Centre for Employee Ownership (www.nceo.org)
Replay Webinar
Your company is working hard to help employee owners get skills, acquire knowledge, solve problems, and work together to make the company thrive… but how do you know if it’s working? Employee surveys offer a quick and convenient way to find out and to track changes in your organizational culture over time, but employee ownership companies have used a variety of tools other than surveys, including simple one-time measures. Learn from the NCEO and from a case study company about ways to assess your ownership culture… and put those findings to work for you.
Program
Welcome and Overview
Loren Rodgers, National Center for Employee Ownership
Case Studies
Drew Lebby, Linda Luckenbaugh (Wexco Incorporated)
More Resources, Q&A, Wrap Up
Loren Rodgers, National Center for Employee Ownership
Webinar Format
NCEO Webinar replays are the recorded version of our live Webinars, using PowerPoint presentations broadcast over the internet. You will receive a link to replay the webinar whenever and as often as you wish.
Fee Information
$50 for NCEO members, $75 for nonmembers. Your registration gives you access to unlimited replays while this version of the seminar is online.
How to Purchase
Purchase online using our order form which you can se at:
http://www.nceo.org/nceo/orderform.html
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admin
632 Posts |
Posted - 17 Jun 2007 : 07:50:52
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Articles Online: What Is an Ownership Culture?
Corey Rosen, US National Centre for Employee Ownership Executive Director
May 29, 2007
For the full transcript of this comprehensive article on ownership culture, see: http://www.nceo.org/library/ownership_culture.html .
The following is an extract:
The Essentials of Ownership Culture
Compelling research and decades of experience show that employee ownership is a powerful tool to improve corporate performance but only when paired with what we call an "ownership culture" (details of that research can be found at http://www.nceo.org/library/corpperf.html). Ownership edge companies follow six essential rules:
1. Provide a financially meaningful ownership stake, enough to be an important part of employee financial security.
2. Provide ownership education that teaches people how the company makes money and their role in making that happen.
3. Share performance data about how the company is doing overall and how each work group contributes to that,
4. Train people in business literacy so they understand the numbers the company shares.
5. Share profits through bonuses, profit sharing or other tools.
6. Build employee involvement not just by allowing employees to contribute ideas and information but making that part of their everyday work organization through teams, feedback opportunities, devolution of authority, and other structures.
The table below contrasts ownership management with traditional management.
Ownership Management >>> Traditional management
1. An ownership stake: Employees receive and maintain a level of ownership that is financially significant to them. >>> Ownership is concentrated, with a single person or a small group owning the company.
2. Ownership understanding: Employees understand what ownership means. >>> Ownership issues are seen as irrelevant to employees.
3. Entrepreneurship training: People are trained to have the skills not just to do their own jobs, but to understand how the business works; they learn to be effective. >>> People are trained to do their jobs; they learn to be efficient.
4. Sharing information: Companies share financial and performance information with employees at the company and work team levels. >>> Managers guard information.
5. Short-term incentives: Everyone shares in the short-term rewards of company success. >>> People may, at their managers' discretion, receive bonuses.
6. Employee involvement: Employees have structured, regular opportunities to have meaningful input into decisions concerning the work they do. >>> Ideas come from managers. Employees are allowed to make suggestions (maybe).
Companies that combine these elements create the ownership edge. In 1987, the National Center for Employee Ownership reported in the September/October Harvard Business Review that companies that have an ownership culture grow eight percent to eleven percent faster than would have been expected if they did not. Subsequent research reconfirmed these findings, which are discussed in more detail later in the book. At employee ownership conferences in the 1980s, the talk was all about finance and, occasionally, communication. By the late 1990s, the word had gotten out that the leading employee ownership companies were those with open-book management and highly participative decision making. Leaders and employee owners at these companies became enthusiastic evangelists for this new way to work. Not only were they making more money, but they were having more fun doing it.
Further Resources:
To learn whether your employees really think an act like owners, have them take the NCEO's employee ownership quick survey at: http://www.nceo.org/surveys/mini_questionnaire.php
For detailed ideas on ownership culture, consult the three publications focusing on these issues:
Ownership Management at: http://www.nceo.org/pubs/ownership_management.html
ESOP Communications Sourcebook at: http://www.nceo.org/pubs/sourcebook.html
The ESOP Committee Guide at: http://www.nceo.org/pubs/esopcommittee.html
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admin
632 Posts |
Posted - 22 Jun 2007 : 09:19:49
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ESOP Plan Design and Ownership Culture
Chances are, your company’s ESOP was designed by your lawyer. Its plan features were described as “pretty standard” and that sounded good. You probably ended up with allocations based on relative pay. participation after 12 months of employment and voting rights only on required issues. It’s not likely anyone gave a lot of thought to how these features would affect ownership culture.
That’s unfortunate. ESOPs are quite flexible in plan design. Even if your plan is already in place, you can change most of the features. You can always make the features more generous and, in some cases, you can make them stricter. What follows are some ownership culture considerations in design - or redesigning – an employee share ownership plan.
Participation
Most employees are comfortable with a rule requiring eligibility to participate in the ESOP based on a minimum amount of time employed with the company. They know they have to show some commitment to get ownership. But what if your work force has a lot of seasonal employees or part-time employees you really would like to keep? Requiring fewer hours to participate would get them in the plan. If a lot of your work force is relatively new, you may have a hard time preaching ownership culture when many of your employees are not owners yet.
Allocation
Most ESOPs allocate benefits based on relative pay. This can fit well into your culture if pay is seen as a reasonable gauge of peoples’ contributions to the company. On the other hand, some companies want to send a different message with the ESOP, one more like “we’re all in this together” or “this is a way to get ordinary workers some of the perks normally available only to managers.” A cap on the amount of pay eligible for ESOP contributions might help accomplish this.
Voting
This always seems like the key issue in ownership culture, but research suggests it usually is not- Passing though the right to vote for the board usually does not matter that much to employees, nor does allowing it really threaten corporate stability. Providing employees with greater voting rights, or, as an alternative, some advisory capacity to the board, can be a useful symbol of the company’s commitment to an ownership culture. It is not, however, a substitute for the much tougher responsibility of finding ways for employees to get involved in day-to-day work decisions.
Making Decisions
These are just a few of the key issues to decide. Companies wanting to create an ownership culture might want to get employee input into this design process on any issues management feels are critical to the plan’s financial success. Not only will this create a plan more suited to employee interests, but employees will feel more ownership of a plan they helped create or change.
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admin
632 Posts |
Posted - 10 Aug 2007 : 03:15:37
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Online Resources: Articles on Ownership Culture
Go to : http://www.ownershipassociates.com/online_res_a_oc.shtm for all the links to the articles below.
Ownership Culture / Psychological Ownership
• Carris Companies' Practice of Employee Governance: An article about the Carris Companies and their lessons in employee involvement by Dr. Cecile G. Betit, published in the Journal of Corporate Citizenship.
• Making Employee Ownership Real: An Interview with Loren Rodgers, published by The Foundation for Enterprise Development [now the Beyster Institute at the Rady School, UC San Diego] in its online magazine, Leading Company (August, 2000). Gives an overview of what an ownership culture is and how a company can go about creating one.
• Managing Ownership Complexity by Christopher Mackin and Loren Rodgers, published in the Foundation for Enterprise Development [now the Beyster Institute at the Rady School, UC San Diego] in its online magazine (November, 2001). This article explores two major clusters of interpretations of ownership: one primarily about financial incentive, and the other about a set of ideas we term "ownership culture."
• What do Employee Owners Really Think About Ownership? by Loren Rodgers. Explains the effects of differences between what management thinks about ownership and what employees think. Published by the National Center for Employee Ownership.
• Human Resources and Company Performance by Noemi Giszpenc. A brief synopsis of research on the performance effects of various approaches to human resources management, published by The ESOP Association.
• Briefing Paper 5: ESOP "Kick-Off" Meeting presents a sample agenda for a kick-off meeting that answers employees' initial questions, defuses common fears, and manages employees' ownership expectations.
• Briefing Paper 6: ESOP Training for Middle Managers / Supervisors details an agenda for preparing managers to answer employee questions, sharing the vision statement with managers, clarifying the effect of ownership on management practices, and enhancing managers' group-process skills.
• For the Non-Management Champion. Employee-ownership rarely succeeds if managers are the only ones who support it. Talking one-on-one with co-workers, and slowly persuading them that ownership is for real, is something that can only be done by people outside management. This article provides tips and tools for these employee-ownership champions.
• Organizational Psychology and Definitions of Ownership: This article explores common conceptions of ownership, their prevalence among employee owners, and implications for employee-ownership companies.
• Ownership Theory: Rights and Responsibilities: from the F.E.D. 1996 Annual Journal
• Who's Afraid of Ownership? by Loren Rodgers. Published by The National Center for Employee Ownership in Employee Ownership Report, July/August, 2002, p. 10.
• Creating an Ownership Culture by Christopher Mackin, published in The Journal of Employee Ownership Law and Finance by the National Center for Employee Ownership (NCEO), Vol. II, No. 4, Fall 1990, pp. 79-94.
• Four Challenges of Building an Ownership Culture, the text of a speech delivered in October 1997 to the Slovene Association for Employee Ownership.
• Manage Your Expectations to Avoid the "Option Blues". What do you say to employees with "underwater" options?
• Nothing Measured, Nothing Gained: published in the January/February, 1998, issue of the Employee Ownership Report, the newsletter of the National Center for Employee Ownership
• OCR main page The Ownership Culture Reports are a series of working papers on the quantitative study of ownership culture.
• Ownership and Motivation--What Does Ownership Mean to Employees?: The fourth issue of the Ownership Culture Reports.
• Ownership Cynics: The third issue of the Ownership Culture Reports.
• Trust and Ownership: Trust in Managers and Trust in Ownership: The first issue of the Ownership Culture Reports.
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admin
632 Posts |
Posted - 16 Oct 2007 : 05:50:33
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Study Finds Ownership and Participation Build Commitment More Than Just Participation
A common misconception about ownership culture is that because the performance effects come mostly from getting employees more involved in sharing ideas and information, only participation is needed, not ownership as well (we call this the “sense of ownership” argument). Robert Levine’s Ph.D. dissertation provides intriguing evidence that the sense of ownership argument does not work very well. Levine surveyed workers and the human resource managers at four ESOP companies and one non-ESOP employee-owned company. He compared results to those of five similar non-ESOP companies. Companies ranged from 40 to 265 employees. Employees were asked a variety of questions about how strongly they agreed or disagreed with various measures of how much influence they had at work. They were also asked questions measuring organizational engagement.
The results were intriguing. On almost all the measures of engagement, as participation levels rose, employee owners felt more engaged than non-owners. In the non-employee ownership companies, on some measures there was no relationship between stronger participation and engagement, while on others, the relationship was ‘humped’. That is, engagement goes up to a certain level of participation then falls back to the same level as if there were no participation. So higher levels of participation in the non-employee ownership companies actually led to a decline in engagement. Levine does not reach conclusions on why this pattern occurs, but he suggests it could be that managers in the employee ownership companies take employees’ ideas more seriously, or employees in these companies view their responsibility to participate more seriously. At the NCEO, we have long argued that as participation absent ownership goes up, employees may start to feel manipulated (because they are producing gains for someone else), while managers may feel more threatened by employees. In contrast, managers in employee ownership companies would tend to view employees as having the right to participate.
The sample size is far too small to be definitive, but the results are so strikingly consistent across many measures that they are hard to dismiss, especially given all the prior research on the synergistic effect of ownership and participation.
From: The Employee Ownership Report, September/October, 2007, NCEO (US).
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admin
632 Posts |
Posted - 12 Jan 2008 : 07:33:35
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Creating Balance in Ownership Cultures
An effective ownership culture is, in large measure, a balancing act. Ownership cultures involve sharing information with employees about the company’s products, finances, critical numbers, and prospects. It requires a high degree of employee involvement in decisions affecting their job. It demands a bias towards collaborative, consensual decisions rather than decisions by decree. Yet companies can overload people with information, give people more authority than they can handle, and waste time in endless meetings. The trick is finding where, at any moment for any company, the balance between too much and too little resides.
Sharing Information
Employee ownership works best when people are kept very well informed about how their company is doing, how their own work contributes to company success, and how the employee ownership plan works. Most companies err on the side of giving people too little of this information. People are asked to make suggestions and decisions about how their work should be done with only a vague idea of what measurements can be used to determine if what they are doing makes money or loses money. Sure, they have been to the annual or quarterly meetings where the company’s overall financial picture is discussed, and maybe they even understood part of it, but do they know how to measure whether an idea, a different way to do a job, or a decision made to please a customer actually adds to the bottom line or subtracts from it? This kind of detailed linking, often with some kind of targets for meeting critical numbers and rewards for exceeding them, is essential to give employees a real sense of linkage to larger ownership objectives.
But there can be too much information. For instance, maybe the company provides an in-depth assessment of its balance sheet or depreciation schedule. At some point in this process employees will get more information than they can possibly use to relate to what they do every day. The manager’s blow-by-blow description of exactly what he projects next quarter’s sales to be may be fascinating to him, but tedious to everyone else. As Mark Twain once noted, the most boring people are those with good memories. We all have good memories for our specific line of work; the trick is to distill that to what others need to know.
Making Decisions
Employee ownership companies generally delegate a lot of decision making downward, both to individuals and to groups. It makes sense to do so. In today’s business world, more people need to make more decisions about more things more quickly for a company to succeed. Having employees be owners, equipped with both the motivation and the tools to make more and better decisions, allows companies to move faster, to be more responsive to customers, and to free management to concentrate on more strategic issues.
On the other hand, pushing down decisions should not become an end in itself. Success can’t be measured by how many people make how many decisions, but by whether decision-making authority is consistent with expertise and the need for timely action. Asking people to make decisions when they really don’t have the skills, or don’t need to take an action, will only be frustrating to them and people around them.
Collaborative Decisions
Making decisions in teams is a defining feature of employee ownership cultures. Group-based decisions allow people to share ideas and information and be stimulated by other people’s interactions. Done well, it also builds legitimacy into the decisions that are made. Decisions take more time, but are usually better.
But some decisions really don’t need to be made in groups. Only a few people may have relevant expertise or interest. Or perhaps the group decision would be better, but the matter is not important enough to justify the time required to meet, or perhaps the group is only likely to make marginal improvements in the outcome.
Finding the Balance Point
There is no magic way to find the balance. Moreover, the balance point will constantly shift, forever leaving some ambiguity in people’s minds about just when information or decisions will be shared. In general, companies need to focus on when sharing information, pushing down decisions, and making decisions in teams adds value, directly (through better decisions) or indirectly (through the interest and ability to make them in the future). Each choice needs to be justified in these terms, and employees need to understand why and how these choices are made. Just understanding why there are limits on ownership culture practices can itself help people look for the balance themselves.
From: The Employee Ownership Report, NCEO (US), July/August, 2001.
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admin
632 Posts |
Posted - 24 Mar 2008 : 14:30:42
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The Meaning of Ownership for Employees
From: The Employee Share Ownership Plan: what value has it for Australia? John McElvaney And Dianne Waddell Bowater, School of Management and Marketing. Deakin University, Australia 2006.
The full paper can be accessed at:
http://acquire.cqu.edu.au:8080/vital/access/manager/Repository/cqu:866?expert=creator%3a%22McElvaney%2c+John.%22
Loren Rodgers (2001) using his Ownership Culture Survey™ (OCS), a survey-based approach to measuring the psychology of ownership - based on work with USA employee ownership companies over 15 years - identified five major meanings of ownership for most employees.
The findings are:
1. Financial Payoff: ownership as a financial benefit--as owners, people expect at some point to receive cash value.
2. Participation: owners being included in the decisions that affect their day-to-day work; wanting to have a say over the issues that affect their working conditions.
3. Influence: having a part in broader, company-wide decisions. Owners want a degree of influence over strategic issues.
4. Community: a bond with their fellow owners; they want to feel that the whole company is "in this together."
5. Fairness: being treated fairly by the company; owners want sensible rules and they do not want "special treatment" for specific individuals (Rodgers 2001).
The above meanings with the exception of ‘Participation’ could be categorised using the Hersberg’s ‘Motivation Theory’ as Hygiene factors and if an effective ESOP was introduced it could act to minimise dissatisfaction, but an ESOP alone would not be a motivator. To employees, the ‘Participation’ meaning of share ownership is more likely to be the factor that results in employee motivation and higher performance (Hersberg 1968). Thus it is possible that the introduction of a broad ESOP with out combining an employee participation program is unlikely to achieve the outstanding success and benefits sought. Those employees who feel like owners are those with higher relative levels of share ownership and perceptions of participation, and this feeling is significantly related to relatively high levels of commitment and satisfaction with the organization. This approach suggests, therefore, that ownership does make a difference (Pendleton 1998).
Participation may also be one of the factors that contribute to the success of Executive ESOPs because unlike the normal employee, executives do participate in the decisions that affect their day-to-day work. A comparison of an employee-owned and a 'conventional' firm found that employee participation was higher in the employee-owned firm, and that, the greater the perceived extent of participation, the higher the level of organizational commitment (Rhodes and Steers 1981).
Employees benefit from ESOPs in a number of ways. Some of the main benefits include:
1. a feeling of ‘ownership’ of the company;
2. a degree of participation in the company and a voice in the business as a shareholder;
3. greater job satisfaction through receiving tangible rewards for their performance;
4. a tax efficient way of acquiring shares and the opportunity to earn a substantial capital sum.
5. increased flexibility and choice when negotiating workplace arrangements;
6. a sense of commitment and a stronger relationship with their workplace;
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admin
632 Posts |
Posted - 04 Sep 2008 : 05:54:42
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Lessons From Employee Ownership Companies
Culture is the result of messages that are received about what is really valued. People align their behaviour to these messages in order to fit in. Changing a culture requires a systematic and planned change to these messages, whose sources are behaviours, symbols and systems.
Most material on employee ownership and participation tends to be at a very high level of generality about this issue. While that has its value, it can also be discouragingly vague. What most management people need are specific examples of what other companies have done - though without proposing that companies simply copy what others have done.
The following eight lessons are meant to be evocative, helping people to conjure up their own ideas about what would work best for them. These lessons are from what the most effective employee ownership companies have taught us.
Briefly, these lessons are:
1. The personal commitment of the person at the top of the organization is essential.
2. A set of written values embodying your commitment to employee ownership is an important starting point.
3. Symbols of how everyone is treated as an owner are important.
4. The people who have the most expertise about an area should be the ones making the decisions about it.
5. If employees are to participate in decision making, they need training to develop the necessary skills.
6. Information should be shared not just from the top down but from the bottom up as well.
7. Participative decisions take more time to make but less time and effort to implement than non-participative decisions.
8. No pat formulas exist for implementing the ownership theory. What works for one company may not work for another, or even for the same company at a different stage of its development.
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admin
632 Posts |
Posted - 13 Mar 2009 : 09:42:46
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Making Employee Ownership Work: Employee Ownership Culture
The following report is highly recommended for the company practices which are detailed in the section "Employee Ownership Culture"
'Making employee ownership work’ is a new guide from the Employee Ownership Association (EOA) UK and co-ownership advisers the Baxi Partnership, based on a survey of 25 EOA member companies including John Lewis, Unipart, Arup and Mott MacDonald. Designed for easy reference, the guide compares company practice under five headings: employee engagement, management systems and reward, governance and employee voice, employee ownership culture, and ethics and social responsibility.
The author of the report is Sarah Silcox. It was published in February 2009 and can be accessed at: http://www.employeeownership.co.uk/publications.asp.
About the research
The report is designed to help co-owned companies get more from the employee ownership advantage. It compares how 25 co-owned companies handle key performance issues such as employee engagement, reward, governance, culture, and social responsibility - that is, how the co-owned organisations actually managed the “people” aspects of employee ownership.
The purpose of the research is to provide member companies with benchmark information through examining the following areas:
• Employee engagement: securing employee engagement; informing and involving employees in strategic decision-making; giving employees an input into improving their jobs and working environments;
• Management systems and reward: using employee ownership (EO) in recruitment; reflecting EO in performance management; financial benefits for employees from co-ownership; separate incentives for managers and other groups;
• Governance and employee voice: formal employee representation structures; employee representation on boards; induction and training for employee representatives; and the role of employees in selecting managers;
• Employee ownership culture: ways of fostering an involved culture; most effective channels for internal communication; promoting EO to clients, customers and suppliers; and
• Ethics and social responsibility: corporate social responsibility (CSR) policies; core values and principles; encouraging employees to get involved in CSR activities; budgets and separate charitable trusts; CSR decision-making.
Participants were also asked to give “do’s” and “don’ts” under each of the above five themes.
Organisations were also asked to provide documentation in support of their responses (for example, written constitutions, remits for employee representation bodies, and sets of core values.
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admin
632 Posts |
Posted - 04 Jul 2009 : 11:13:34
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Where Does Leadership Come From?
"Leadership comes from the top down." People say it so often that it sounds like a law of nature, but reality is more complicated. Leadership does come from the top, but it also comes from the bottom and the middle and the sides. Executive managers have disproportionate power, but truly dynamic employee ownership requires most people in an organization to be leaders.
As researchers have documented extensively, employee-ownership companies that actively strive to engage employees as entrepreneurs tend to outperform. The NCEO's book The Ownership Edge covers all aspects of what many people call "ownership culture," but this article looks at just one piece of the puzzle: How does the idea of ownership culture grow and spread inside a company?
Everyone's Responsibility
Employees interact with each other countless times per day, and each interaction changes the culture of your organization a tiny bit. Every conversation, intranet post, thank-you note, paycheck, unanswered e-mail, door held open, apology, and piece of gossip makes people see the organization as slightly different than they thought it was. They may see it as more caring, more professional, more sloppy, more fair, more idealistic, more boring, or more employee-owned.
Some of the messages that come out of those interactions travel further and are easier to remember. Those messages are what Malcolm Gladwell calls "sticky" in his book The Tipping Point. An example of the kind of message that you do not want to be sticky comes from an anonymous employee survey: "someone told me that, quote, 'ESOP is merely a way of making you THINK that you are important to this company.' This statement has been in my head since then."
If the company president heard someone say that and answered, "no, really! You ARE important to the company," it would have less impact than a non-management employee who gave a heartfelt, credible response. If you are a non-management employee-owner, no one is better positioned than you to stop the cynicism-building stickiness in these kinds of interactions. Take responsibility in as many conversations as possible to leave the other person feeling more like an owner.
You will never convert everyone, and companies work just fine even though not everyone is on board: in fact, at the average employee-ownership company in the NCEO database, about 23% of respondents feel a degree of cynicism.
Middle Managers
The people who can most effectively change the stickiness of rumors and speculation are middle managers: they hear the buzz, and they have enough information to nurture the good messages and discredit the bad messages with concrete facts.
Here's the problem: surveys that measure the level of cynicism show that middle managers have the highest levels of cynicism. In other words, the people who are best positioned to affect many of the messages swirling around your company often work against an ownership culture. We know cases where enthusiastic presidents have terminated ESOPs because middle managers blocked the development of an ownership culture.
To be clear: this is not to blame middle managers. Consultant Alex Moss of Praxis Consulting Group describes their position as "pushed from above, pulled from below" because companies often ask them to do the extremely difficult task of developing an ownership culture while still being responsible for getting employees to meet tough performance targets. To fill their leadership role, however, middle managers need support: information, being included in decisions, previewing communications programs.
Senior Managers
If you are a senior manager, a big piece of your role is to support middle managers. One counter-intuitive way to do that is to hold them accountable for strengthening the ownership culture. Job descriptions and performance evaluations should include goals related to culture or participation. You also need to give them resources to achieve those goals and offer them a role in defining what the company's ownership culture should mean.
As a senior manager, the impact of your interactions is large because the issues that people talk about with you are more likely to be central to their job satisfaction. Sometimes you will feel that you are not having any effect, but some of the seeds you plant will bloom, and it's impossible to know which ones.
There is, however, one unique and dramatic power that you have as a company leader: no one else can destroy a culture as fast as you can. If you ask for input and ignore it, if you make a rule and then fail to live by it, you can undo years of culture building in 15 seconds. Companies need to address these culture-destroying moments swiftly, publicly and decisively.
You also need to be aware of the subtle cues you send, from body language to catch-phrases. Start thinking about how often you use "I" and "we," how much you talk versus listen in conversations, and whether you hold yourself to the same standards that you hold others to. Make an effort to eliminate phrases like "leadership comes from the top" from your speech—and over time out of your mind. These seemingly small things will help change your interactions so they contribute to building the culture you want.
From: "The Employee Ownership Report", May-June, 2009, NCEO (US) www.nceo.org
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admin
632 Posts |
Posted - 25 Nov 2009 : 08:07:52
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Practical Solutions for Creating an Ownership Culture
In September, the NCEO held a live Webinar based on our popular small book, An Ownership Tale, the hypothetical (but very real) story of a company's successful struggle to move to an ownership culture.(See: http://www.nceo.org/main/pub.php/id/36/ for more information on this book).
Attendees were presented with several scenarios of stumbling blocks that came up for the company and then took a few minutes to submit ideas on how to address these issues.
We got some terrific insights and wanted to share just a few. The comments have been edited or combined for clarity.
Making Initial ESOP Communication More Effective
ƒÞ Most employees believe the only reason owners implement an ESOP is for themselves, not the employees. Companies need to be above-board and show how the ESOP benefits both the sellers and the employees, not just the employees, to make communications credible.
ƒÞ Don't use a lawyer to explain the plan. Get someone closer to the average employee's level to help explain it.
ƒÞ "Priming" is a great idea. We sent out our presentation a couple of days in advance to help employees think about questions beforehand. Then we asked people to come to the meeting with at least one question written down. People were much readier to listen and learn.
Better Understanding Business Ups and Downs
ƒÞ You can't just give people an annual update. They want to know what's going on as it happens. So have meetings frequently, such as monthly or quarterly. Explain the statements and give them projections for what might happen next.
ƒÞ Meeting in smaller group to digest the news and talk about ideas for responding will get much better employee input than a large meeting.
ƒÞ Get in the habit of forwarding good news in the same time frame and manner as bad news.
ƒÞ Have a plan in place in advance for dealing with worst-case scenarios so employees have more of a sense of control over the situation.
Open Doors Aren't Enough - Ways to Get People More Involved
ƒÞ Open-door policies usually don't get many people to make suggestions. Leaders need to have a door open both ways. Go out and ask questions of employees and share some of your ideas with them too.
ƒÞ An open-door policy has the same specificity problem as asking people to "cut costs." Leaders need to be more specific about creating new ideas. Meeting in groups or a problem-solving sheet would more specifically attack the closed mouths issue.
ƒÞ Most of the time you do not get results the first time you ask. Leaders need to repeat the message to work past the mistrust and skeptical feelings that have developed over time.
ƒÞ Have meetings of small groups or teams and give them the time to think and work together on ideas.
ƒÞ Have an anonymous way to send suggestions. This may help if people are afraid of being linked to a certain idea.
ƒÞ People are afraid their ideas will be seen as stupid or unreasonable. They may have good ideas but not know how to implement them. They may have given feedback in the past but it was not taken, so why bother this time? They may be thinking my part in the company is so small, so how can l affect the bottom-line? Open-door policies won't work; you need' specific structures like smaller committees to tackle improvement and cost-cutting measures.
ƒÞ Get the ball rolling. Set up small brainstorming sessions within different groups in your company. Challenge them with a goal.
ƒÞ Create incentives for coming up with ideas that are implemented and celebrate when employee ideas are implemented
Making Teams More Effective
ƒÞ Give the small group leaders a certain pot of funds for short-term incentives. Management can review/ approve these short-tern team incentives to make sure that they tie into the overall goals.
ƒÞ Teams should have a charter.
ƒÞ We made idea submission mandatory each week. Individuals whose ideas were implemented were announced and rewarded. This provided enthusiasm for others to submit winning ideas.
ƒÞ Have employees pick their own critical numbers and justify why that is critical and how they will achieve that.
ƒÞ The managers can put it in each employee's performance review to come up with a cost-saving idea.
ƒÞ Each department group needs to share ideas with the entire company.
ƒÞ Link each group by having a representative from each one on a company-wide committee. The cross-fertilization of ideas can be very creative.
Linking Behavior to the Bottom Line
ƒÞ Employees are asking for what affects their line of sight. It may be advertising to the company what each department is able to do to make the company successful.
ƒÞ Publish all of the good employee idea on the intranet with the response that is researched by parties in the relevant departments. Show how these ideas actually affect the bottom line.
From: The Employee Ownership Report, November-December, 2009. NCEO (US) www.nceo.org
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admin
632 Posts |
Posted - 24 Feb 2010 : 10:39:56
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An Ownership Tale
by Corey Rosen, National Centre for Employee Ownership (US)
An Ownership Tale is the story of a fictional company, BTA Associates, and how it moved from having an ineffective ESOP to an engaged ownership culture. What happens in the book is based on NCEO director Corey Rosen's 30 years of working in this field. The barriers, stumbles, conversations, first steps, and final resolutions are all based on the real experiences of companies and their employee owners.
This 65-page book is meant to be accessible to every employee in your company. You might choose to buy it just for management or an ESOP committee; others will buy a copy for everyone. The book contains specific ideas you can put to work in your company, not just generalities about the need for better trust or communications. It also includes a set of group exercises to help implement the ideas.
In short, this book is an essential tool for creating an ownership culture.
"An Ownership Tale is more than just a story about business. It is a story about individuals who figure out that by working for the success of one another you can create a special place where people know that they can make a difference." -Jack Stack, President & CEO, SRC Holdings Corp.
To purchase a copy, go to: http://www.nceo.org/main/pub.php/id/36/ ($5.00 for NCEO members; $10.00 for nonmembers)
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The Benefits of ESOPs and Ownership Culture
