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The Employee Ownership Update

Corey Rosen

August 16, 2010

(Corey Rosen)

Employee Engagement Strongly Related to Corporate Performance

In its annual survey of employees in client companies around the world, Hewitt Associates found the largest drop in employee engagement scores it has ever recorded. The analysis reports a clear link between employee engagement levels and financial performance. Organizations where 65% or more of employees are engaged had total shareholder returns 19% higher than the average total shareholder returns. Companies with less than 40% of employees engaged had total shareholder returns that were 44% lower than the average. The study is based on 900 organizations worldwide. Engagement looks at employee morale, confidence in the organization, career opportunities, rewards and recognition programs, and trust in leadership. The data parallel findings on employee engagement and shareholder returns from the Great Place to Work Institute, which creates the Fortune "100 Best Companies to Work For" lists. While part of the causality is that more successful companies have more engaged employees (it's easier to be engaged in a company doing well than one facing financial problems), the findings fit in with many other studies showing that among predictors of corporate success, engagement is the most powerful but is one of the least seriously attended to by leaders in conventional companies. Fortunately, the employee ownership community takes these issues much more seriously.

They Never Paid Me What They Owed Me!

Not surprisingly, the economic difficulties we are facing have resulted in a significant increase in the number of often desperate calls we get from people who say they never got their ESOP distributions or, less often, the equity rights they were promised—or, if they got them, they were not what they expected. Other callers want to know how they can get their money sooner. It is hard to tell from most of the calls whether the company has really been remiss or the employees have just not been paying attention. Very commonly people say they never got any material or, if they did, when they tried to exercise their rights, they got no response, despite repeated calls.

These kinds of problems, legitimate or not, can be toxic. These employees still usually know people who are working at the company, and they can radically undermine the credibility of your plan. It is easy to for companies to say that they did what they were required to do by sending out written (or sometimes electronic) notifications and plan descriptions, and if employees don't read them, that is not the company's problem. But that's too easy. Haven't you ever gotten some document in the mail you either recycled or ignored because you thought it was junk or not really important or, alternatively, that you planned to read one day then forgot about? I certainly have. Employees do the same thing.

It's far better to be more proactive. When people leave, the ideal solution is for someone to actually meet with them to make sure they know what to expect. Alternatively, at least get them to confirm, in writing, that they have received the required documents. Then make sure they have a phone number to call with questions—and that someone will get back to them (most of our callers say they cannot get people to call back).

UK Starts Down Path of Privatizing Public Service to Cooperatives

The new Cameron government has followed up on its pledge to privatize public services through what the British call "mutuals" (we would call them cooperatives). The first wave of 12 so-called "Pathfinder Mutuals" will act as a pilot for an envisioned much larger program. The mutuals will be run by the staff and owned variously by employees, customers, or other entities tied to the services being provided. The 12 were selected from thousands of proposals submitted to be part of the initial program. The new companies will receive free technical support from a variety of consulting firms as well as the staff of the John Lewis Partnership, the large employee-owned retailer, and the Baxi Partnership, which provides advice to employee ownership companies. Among the new enterprises will be employee-owned companies providing services for the homeless, programs for people with disabilities, and an agricultural college.

Lists of ESOP Companies Now Available

The NCEO has cleaned up and packaged data from the U.S. Department of Labor on ESOP companies. The lists are available for all or part of the U.S. and include basic information about the companies, such as names, locations, and plan age. Learn more at this link.

Where Would You Like the 2013 Conference to Be?

We are now considering Seattle, Los Angeles (probably the Hollywood area), and San Francisco for the 2013 conference. Los Angeles and Seattle would offer about the same hotel prices; San Francisco would be about 15% higher. Where would you like it to be? Contact NCEO Conference Director Deborah Krant (dkrant@nceo.org).

Meanwhile, remember to put April 13-15, 2011, on your calendar for our 30th annual conference. This will be my last conference as director (but I will stay on staff, I hope, for many, many years) and Loren Rodgers' first as the incoming director. Information on sponsorship, speaking opportunities, and other details is available from Deborah. Also, let any of us know any ideas you have for topics or other things you would like to see at the meeting.

Reminder on Ownership Thinking Conference

As it has in the past three years, the NCEO will sponsor the 4th annual Ownership Thinking Conference, to be held in the Denver area on September 16 and 17. Brad Hams, president of Ownership Thinking, is a long-time supporter and former board member of the NCEO, and his company provides training and consulting to create cultures of ownership thinkers. Their theme this year is "Increasing Accountability with Ownership Thinking," and I am one of 19 nationally recognized experts and business leaders who are speaking. To learn more, visit Ownership Thinking's Web site or call them at 303-984-1434.

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