Every entrepreneur has at some point wished they could ‘clone’ their best team members. Faced with mounting challenges, they’ve muttered to themselves something along the lines of: “If only I could find someone else like Jane – she just gets it.”
Not literally clone Jane, but mirroring her performance and approach. The ‘chosen few’ are often just that – few. Owners prize employees who are fully engaged with the culture, committed to the mission, delivering against their goals and sharing the journey. Replicating that approach is key to scaling the business.
We are all owners
One way to spread this ‘ownership mentality’ is to create an Employee Share Ownership Plan (ESOP). The logic goes that if you want employees to think long-term, to go beyond and engage with the company, a fundamental part of that is sharing in its success. Not just through a long-term incentive plan, but making them actual owners. There is evidence to suggest that employee-owned companies outperform public or closely held businesses.
Transitioning to an ESOP is a huge step for a business owner. In fact, we’ll be joining many considering this move, and others sharing the lessons at the NCEO conference in April. There is one assumption which is often overlooked, beyond the financial mechanics of the transaction. The underlying premise of an ESOP is that people are rational and will behave in a manner which is financially advantageous to them.
Ensuring the success of an ESOP
Trouble is – people are not always rational. They are full of emotions, beliefs, and biases which impact their decision-making, and organizations are a complex web of relationships which change our behaviors. So an ESOP alone might not directly translate into improved performance.
To get the most from an an incentive plan, companies need a system to reinforce the values they so prize and to make sure they are actively being lived each day. Most organizations will have values defined, but are they holding staff, and the company as a whole, accountable to those behaviors?
Every organization has goals – but do they have a system in place where each employee can see how their actions will contribute to those goals? And then to assess employee performance against individual goals which map to those company priorities? Arguably, this alignment system is how owners can get the behavior and performance they want. The ESOP provides the fundamental motivation, while the alignment system ensures the behaviors.
Without the performance alignment system, the ESOP relies on the assumption that the new employee-owners will respond in the way the primary shareholder wishes. No doubt many will. But an ESOP is a huge transition – and not without cost/risk to the owner. For those considering an ESOP, perhaps it’s the final stage on the journey to high-performance employee-owners. Getting staff aligned, accountable for their performance and living the values, might come first. For those already down the ESOP track, an alignment system can magnify the impact and really make the program come alive
There’s no way to clone Jane. But there might be a way to create an army of Janes (and Johns and Jeffs and Jackies) if we’re all aligned on the mission, holding ourselves accountable and living the core behaviors we value most.
See you at NCEO.