Mike McKenzie is the CEO of Pierce Decorative Hardware. He shares his insight on inspiring employee loyalty and growing his company.
(Photo courtesy of Mike McKenzie)
What is a way to inspire employees, so they feel invested in your small business?
Much is being written these days about the importance of creating a culture of ownership within your small business. This makes great sense intuitively as it is human nature that most people work best when they work for themselves or for a commonly shared group objective. Most people have likely heard the phrase ‘no one ever washed a rental car.’ It is a metaphor that is highly applicable to business organizations.
As your company grows, your ability to micromanage each aspect of the business diminishes quickly, and the importance of a shared sense of ownership grows. Accountability needs to be replaced by ownership. There are many ways to foster this culture of ownership within a growing company.
- Lead with trust and empathy. Know each of the members of your team in as meaningful a way as possible.
- Create an inclusive atmosphere where people can develop their individual talents to help the company.
- Remember and use the plural pronouns — we, us and ours.
- Give acknowledgment regularly to the team.
- Empower and delegate.
Consider, however, a scenario where a business has grown successfully, and the company’s leadership wants to take this culture of ownership to actual ownership through implementation of an ESOP (Employee Stock Ownership Plan).
There are many reasons to consider an ESOP, but let’s focus on how it positively impacts employee productivity. Data from numerous academic studies completed over the last 30 years have clearly shown the efficacy of ESOP’s at increasing productivity. For example, Harvard Business School studies in 1987 and 1991 reported 5.4 percent higher sales growth in ESOP companies compared with non-ESOP companies. A 1999 Kellogg School of Management study reported 2.7 percent higher return on assets and 6.9 percent higher total shareholder return compared to non-ESOP companies.
An ESOP isn’t a silver bullet for all companies that is guaranteed to inspire employees, but if you have been successful at building your company, it may be a tool to carry the business forward with a highly committed team dedicated to succeeding.
What type of benefits do employees see through an ESOP?
Obviously the benefits vary from company to company, but data from the NCEO (National Center for Employee Ownership) indicate that ESOP participants have about three times the retirement assets compared to employees in comparable companies. Additionally, ESOP employees were considerably less likely to have been laid off during the most recent economic downturn. Equally important, there is the benefit of knowing that everyone at all levels of the organization can contribute to their success and the success of the team.
When is it a good time for a business to set up this program?
When a company is successful and has grown to 15 – 20 employees, establishing an ESOP is a possibility. At that point, a feasibility study by a recognized ESOP consultant is the first step to consider taking.
How much does it cost to set up the ESOP?
There are both initial startup costs to establish the Plan and ongoing annual expenses, as well. For a smaller firm, the cost to establish the Plan might be $25,000 – $50,000, with annual expenses in the $10,000 – $15,000 range. While certainly not inconsequential, the costs need to be weighed against the direct benefits and the potential productivity gains.
This article was written by Robin D. Everson for Small Business Pulse