The Ownership Incentive

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The Ownership Incentive
Designed by Ownership Associates, Inc.
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ESOPs change the deal
Everyone has a relationship with the company
they work for. We dont think about the
relationship much because it is so commonly
understood.
In the Soviet Union, employees often talked about
their relationship with their company by
saying We pretend to work and they pretend to
pay us.
In the United States, that sort of relationship
would lead to economic failure of the company,
and the employee. (And it may have contributed
to the failure of the Soviet Union.)
Relationship
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ESOPs change the deal
Everyone has a relationship with the company they
work for. We dont think much about the
relationship because it is so commonly understood.
In the Soviet Union, employees often talked about
their relationship with their company by
saying We pretend to work and they pretend to
pay us.
In the United States, that sort of relationship
would lead to economic failure of the company,
and the employee. (And it may have contributed
to the failure of the Soviet Union.)
Relationship
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Standard Employment Deal
The Standard Employment Deal is the one we are
most familiar with. It is the reason we all went
to work at our first job.
We started working because we had something the
company wanted our time and effort, and the
company had something we wanted money.
In exchange for our work (time and effort) the
company paid us money.
For many employees, this is the extent of the
relationship between them and their employer.
They show up, work for 8 hours, and the company
pays them 8 hours wages.
8 hours work
8 hours pay
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Standard Employment Deal
The Standard Employment Deal sometimes
encourages certain behavior that might not be
most productive for the employee or the company.
How can I make the most money?
The employee wants to increase his/her pay as
much as possible, while expending the least
amount of energy.
How can I make the most money?
The employer wants to increase the productive
output of the employees, while maintaining the
lowest possible costs.
8 hours work
8 hours pay
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Standard Employment Deal
The ESOP adds another connection to the
employees relationship with the company. In
addition to receiving pay, the employee can make
additional money through the long-term success of
the company.
How can I make the most money?
The employee still wants to make the most
money. But now, he/she can make money through
ownership, too.
Ownership rewards
8 hours work
8 hours pay
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Standard Employment Deal
The ESOP adds another connection to the
employees relationship with the company. In
addition to receiving pay, the employee can make
additional money through the long-term success of
the company.
How can I make the most money?
The employee still wants to make the most
money. But now, he/she can make money through
ownership, too.
This additional interest in the company is what
transforms an employee into an employee-owner.
Ownership rewards
8 hours work
8 hours pay
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Employee-Ownership New Deal
But the company doesnt just give away
ownership to employees for the fun of it. In
general, the company hopes and expects that the
new employee-owners will contribute to company
success.
How can I make the most money?
To help the company be more successful, the
employee-owner needs to share his/her ideas and
effort.
ESOP
Ideas and effort
Ownership rewards
8 hours work
8 hours pay
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Employee-Ownership New Deal
So the new relationship between employee-owners
and the company includes the old relationship,
How can I make the most money?
The employee contributes 8 hours of work and
receives 8 hours of pay.
ESOP
8 hours work
8 hours pay
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Employee-Ownership New Deal
So the new relationship between employee-owners
and the company includes the old relationship,
but builds upon it.
How can I make the most money?
Employee-owners share ideas and effort, and they
receive the rewards of ownership.
ESOP
Ideas and effort
Ownership rewards
8 hours work
8 hours pay
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How does the New Deal work?
Now that we know what the new relationship is,
and what it looks like, how does it work?
To make the new relationship work, employees
need three things, the
to make the company succeed
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Means
Employees have the means to make the company more
successful through their jobs.
Employees have immediate control over how they
individually perform in their jobs. Their
personal performance also helps determine the
success of their department, which influences the
success of the company.
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Motive
Employee-owners have the motive to make the
company more successful because they share in the
future success of the company.
When the company is successful, the value of the
company usually increases. So does the value of
the companys stock. As the companys stock
value increases, so does the value of the stock
in the ESOP, meaning employees benefits increase
in value, too. For more information about how
employees benefit from company success, see
Ownership Associates Ownership Facts
curriculum.
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Opportunity
The opportunity to make the company successful
happens in different ways at different levels.
Employees have immediate control over how they
individually perform in their jobs. The degree
of control depends on a number of factors related
to employee autonomy.
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Opportunity
The opportunity to make the company successful
happens in different ways at different levels.
Employees can also influence their colleagues and
team to improve procedures, processes, and
teamwork. This influence is cooperation or
collaboration that improves department
performance.
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Opportunity
The opportunity to make the company successful
happens in different ways at different levels.
At most companies, employee-owners have some form
of influence over company policies as well. At
some companies, it is simply a suggestion box.
Other companies have more extensive procedures,
and, in a few cases, even democratically elected
company leaders. For more information on these
levels of influence, see the Ownership Associates
Frontiers and Boundaries curriculum.
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Opportunity
The opportunity to make the company successful
happens in different ways at different levels.
At most companies, employee-owners have some form
of influence over company policies as well. At
some companies, it is simply a suggestion box.
Other companies have more extensive procedures,
and, in a few cases, even democratically elected
company leaders. For more information on these
levels of influence, see the Ownership Associates
Frontiers and Boundaries curriculum.
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Employees Return on Effort
When employees take advantage of these
opportunities, the company is likely to be more
successful. In the end, the employees share in
this success. Investors seek a good Return on
Investment. These opportunities allow employees
to earn a Return on Effort.
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Summary
Employee-owners have an additional interest in
company success through the ESOP. Instead of
just seeking increased wages, employees want to
earn their Return on Ownership.
Employees have the means
The ESOP gives the motive
Employees need to take advantage of their
opportunity, and managers need to find ways to
expand employees opportunities.
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Conclusion
In the end, many factors influence the success or
failure of the company, and at work employees
react to their peers, supervisors, managers, and
many other issues.
However
Personal life
Managers
Research has consistently shown that
employee-owned companies with effective employee
involvement are more successful than their
competitors.
Competitors
Products
Colleagues
Customers
Economy
Supervisor