NCEO: The National Center for Employee Ownership
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Employee Ownership Concepts in Nonprofits and Government

by Corey Rosen

$25.00 for NCEO members; $35.00 for nonmembers

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The concept of employee ownership might not seem to be a reality to workers in the nonprofit and government sectors. After all, employees cannot truly earn shares in these organizations because there is nothing to own. This book shows how, in fact, employee ownership can be relevant in these situations. In some cases, nonprofit and government agencies transform their employees into owners, literally, by spinning off potentially for-profit aspects of their work. In others, employees may be rewarded with stakes in commercial endeavors that involve their organizations. Simultaneously, principles of "ownership culture," such as open-book management (OBM), can be used within nonprofits and government agencies.

Publication Details

Format: Perfect-bound book, 126 pages
Publication date: March 2004
Status: In stock

Contents

Introduction
1. Why Is Ownership Important?
2. Spinning Off an Enterprise Through an ESOP
3 Spinning Off Through a Worker Cooperative
4. Participating in Commercial Partnerships
5. Creating Equity Equivalent Plans in Nonprofits
6. Ownership Culture
Appendix A: Case Studies
Appendix B: Participative Management
Appendix C: Research on Participation
Appendix D: Stock Options and the New Section 457 Rules

Excerpts

From Chapter 1, "Why Is Ownership Important?"

What makes these employee ownership companies more successful? An NCEO study published in the 1987 September/October Harvard Business Review (Corey Rosen and Michael Quarrey, "How Well Is Employee Ownership Working?") found an explanation. Rosen and Quarrey studied many variables that might affect how an ESOP company performs, including size, industry, work force demographics, unionization, voting rights for employees (not all plans provide this), and many other factors. It turned out that only three factors counted: how much the company contributed to the plan each year; how often it communicated the plan to employees; and, most critically, how much emphasis the company placed on participative management. (By "participative management," we mean companies that give employees significant authority over daily work-level decisions, usually through employee teams. You can read more about this in the following paragraphs.) ESOP companies that were highly participative grew 8% to 11% per year faster than would have been expected, while ESOP companies that had little participation grew 6% per year more slowly than would have been expected-i.e., they had raised expectations but failed to meet them. Subsequent academic studies confirmed these findings. They also confirmed that participative management does not, by itself, provide long-term gains. After a while, employees back away from having a bigger role in helping the company prosper if they receive no long-term benefit from their efforts. A "sense of ownership" does not adequately take the place of "real ownership."