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The Employee Ownership Report

NewsletterConcisely written for leaders in employee ownership companies and for service providers in the field, the NCEO's bimonthly newsletter, the Employee Ownership Report, is the most efficient way to stay informed about legal issues, current events, best practices, breaking research, management approaches, and communications ideas for employee ownership companies.

Available exclusively to NCEO members, the Employee Ownership Report is delivered in hard copy and all issues back to 1997 are available in the members-only area of the Web site.

Nonmembers are invited to read the sample article below from the current issue of the newsletter. Every time a new issue appears, the sample article on this page will be replaced by one from the new issue. Join online for only $90 to receive the Employee Ownership Report and all our other membership benefits.

Read a sample issue of the entire newsletter (September-October 2015).

Sample Article from the September-October 2017 Issue:

Employee Ownership Rewards Engagement, But Does Not Create It

Every year, NCEO staff meet business leaders, former owners, and other key personnel who ask a similar question: "Why isn't employee ownership changing the attitudes and behaviors of our employees or generating more employee engagement?" And every year, we give all of these leaders the same answer: "Owning stock rewards engagement, but it does not create engagement."

The Ownership Myth

For many employee-owned companies, employees are actively more engaged in and educated about the business, but owning stock has never accomplished this on its own. It is the collective effort and commitment of both management and employees to create a culture built on practices that cultivate trust, transparency, effective communication, and high levels of involvement in improving the work people do day-today and in the company as a whole.

Some selling owners are taken aback when they learn that the increased satisfaction of employees upon initially rolling out the stock plan has dwindled and more is needed to create a culture where individuals truly value the company's ownership structure or genuinely feel, think, and act like owners.

For example, the NCEO worked with a company that is nearly maxing out its employer contributions to 401(k) plan and ESOP accounts, but where less than 10% of employees say they feel like owners, 36% feel neutral about ownership, and more than 50% of employees do not feel like owners of the company whatsoever.

This is just one case, but there are many like it. No matter how much company stock employees own, much more effort is required for it to mean much to individuals. The truth of the matter is that stock is an effective reward mechanism, and in order for that reward to grow, the company and its leadership must create practices and structures that make ownership part of how people do their work every day. Ownership of stock is easy, but a sense of real ownership is about the owning the process.

For instance, another ESOP company that has been using the NCEO's Ownership Culture Survey recently found for the first time in its history that 0% of employees said they did not feel like owners of the company whatsoever. By contrast, more than 70% of employees gave one of the highest possible answers to "how much do you feel like an owner of this company?"

This company was actually contributing less as a percentage of pay to employees' ESOP accounts than it had earlier. Instead, it has spent the past decade asking employees for feedback every single year while constantly making improvements to how it communicates, educates, and involves employees in the day-to-day decisions being made at the company. This effort has led not only to a culture of meaningful ownership, but record-breaking profits in 2015 and 2016. That is where the real employee ownership advantage lies.

Communication Is Just the Start

Given any dissatisfaction or general skepticism toward employee ownership, it might seem to leaders that employees just don't understand the ownership plan well enough and that once they do, their attitudes or feelings about ownership will change. Understanding the stock plan is certainly part of the puzzle, but the most effective companies frequently engage employees in both broader business literacy and business improvement, whether to improve the work they do and services they provide or the company culture itself.

As an example, consider the company mentioned above that is effectively creating a culture and true sense of ownership. On nearly every measure used in its Ownership Culture Survey, employees are responding much more positively than in prior years, and also significantly above average when compared to the NCEO's database of employee-owner responses. These survey items measure employee perspectives and attitudes on topics such as ESOP understanding, ownership identity, trust, accountability, information and learning, fairness, and decision making.

While its scores pertaining to communication and education, especially around the ESOP, are exceptional, the company is performing well in a number of other areas, too. Of the more than 100 employees who responded to the survey in 2017, 94% agree that the company "encourages people to participate in decisions that affect their day-today work," 96% agree that "there are adequate opportunities for employees to learn about the business," and 98% agree that they "actively contribute to group problem-solving efforts in their work area."

Do these employees receive real company stock into their ESOP accounts? Yes, but they were receiving the same stock 10 years ago when their sense of ownership wasn't so great. The stock was not enough to create more engagement in the business back then, and it still is not enough today. It has taken long-term effort by many people to actively look for ways to improve the culture, and they have improved more than just their communication. They have created frequent feedback mechanisms, focused on training and development, and empowered employees to actively participate in decision making on a daily basis. And at the end of the day, this created the engagement they desired. Now, they get to reap the rewards of being employee-owned.