“How do you make employees act like owners? Make them owners.”
This line largely refers to what’s involved in making employees owners. It refers to employee equity compensation plans and share plan administration.
However, it does little to explain the true meaning and benefits of employee ownership. Acting like owners implies an investment, not just trading time for money, but a commitment to the company, its values, and, subsequently, the customer.
The benefits of adopting an Employee Equity Plan
A recent study conducted in 2016 found that different companies implement employee equity plans for different reasons. Reasons of employee performance are most important for international companies. Non-public small and medium-sized companies implement employee equity plans for financial reasons. Large companies implement an employee equity plan for their corporate image. However, the one equally important constant between all company types, was implementing an employee equity plan to attract and retain employees.
According to statistics from the National Centre for Employee Ownership, productivity improves by as much as 5% on average during the year a company adopts an employee share ownership plan.
Employee share ownership plans appear to increase overall sales, employment, and sales per employee by about 2.3 to 2.4% per year over what would have been expected without an employee equity plan.
3. Corporate Image
The CEO of SC&H Group, Ronald Causey, says that he uses an employee equity plan to demonstrate to clients and potential clients that their employee-owner are focused on customer.
4. Attraction & Retention
The Employee Ownership Foundation surveyed the association’s member and found that 84% of respondents agreed that their employee equity plan improved staff motivation and productivity. The National Bureau of Economic Research reported that having a majority employee equity plan increases employee engagement scores by about 5% over what they would be without an employee equity plan.
Administering an ESOP
The benefits of adopting an employee equity plan could initially seem to outweigh any of the negatives associated with administering it. However, administering an employee equity plan can be extremely complex and difficult to manage. Global Shares, a leading global provider of equity compensation management solutions, has three tips to ease the administration of an employee equity plan.
1. Automate your Employee Equity Plan
Historically, the record-keeping of equity awards tended to be a largely manual process, usually involving the use of spread sheets to track grants, manage vesting schedules, and relay pertinent information to employees via an annual statement, or other manually created documents.
By automating and streamlining the administrative process, companies can gain many benefits including: reduced costs of the program, more time and resources to manage the plan, an improved participant experience, and an overall reduction in the potential risks of transactional or reporting errors inherent in a manual process.
2. Communicate the employee equity plan effectively to employees
As equity compensation plans become increasingly complex, communicating your company’s key message is a constant challenge. Regardless of how valuable the equity award is to a participant, if they don’t understand their benefits or recognize their worth, they will not see the value and will not use their benefits to their maximum potential.
3. Outsource administration of your employee equity plan
If the administration of your employee equity plan seems impossible or just too time consuming, even after automation, then there is always the option to outsource the administration of your employee equity plan to a third-party. This can significantly reduce the workload of your staff and eliminates the risk of lost knowledge if a member of your administrative team leaves the company.
It can be very easy to get lost in the vast world of employee ownership and share plan administration. So, it is important to take a step back and ask yourself if you want your employees to be more accountable and committed to the company, its values, and its customers. If so, then making your employees owners is a must.
The blog post is from the CEO of Global Shares Tim Houstoun.