Editor's note: This article is written in advance of the Association for Corporate Growth San Diego's "How to Create, Operate and Sell a 'We Company'" event June 21. More information is available at acgsd.org.
Every time a person buys a cup of Starbucks coffee, a pound of coffee at Whole Foods Market or flies on Southwest Airlines, they are engaging with an Employee Ownership (EO) company. The goal of such plans is to give all or a significant number of employees some skin in the game, knowing that if the company performs well, they will benefit. When organizations set up EO programs, they are looking to increase profits, productivity, attract talent and boost morale.
Employee ownership structure options
There are many EO structures to keep in mind and evaluate for their potential to work in particular circumstances. Here are the most common options:
One of the primary advantages to employees is the ability to build wealth over their period of employment. EO companies tend to offer competitive salaries and benefits, which allow employees to have a comparable lifestyle to non-EO companies. According to Family Business Magazine, a report on all ESOP firms in the state of Washington, found that the retirement assets were nearly three times as great, and the diversified portion of employee retirement plans was about the same, as the total retirement assets of comparable employees in non-ESOP firms. Employee wages in ESOP firms are around 5 to 12 percent higher.
Aside from the added wealth, staff members at EO firms usually work in a more positive environment with a team-oriented atmosphere and they have a better opportunity to increase retirement savings.
Benefits to companies
Some business owners have also found that EO plans not only lead to significantly improved productivity, but increased profits as well because staff members understand that they're contributing to the success of the company, which has a positive financial impact on them and therefore, work harder. It's no surprise that studies have found that EO companies grow faster in sales than their non-EO counterparts and improve employees' dedication and sense of ownership. A key ingredient to making this work is implementing a high degree of involvement in organizational decisions at the company.
In addition, EO corporations have a greater opportunity to recruit key prospects because of the added benefits. Not only do these plans help attract highly sought after and committed employees, but EO plans help lessen any turnover. Lastly, EO plans are very beneficial to companies because they offer business owners the ability to take out cash if they need to.
While Employee Ownership may not be for every company, it's certainly doing great things for many organizations and their employees, making such programs a win-win situation for everyone.