Studies in the United States over the last 40 years have repeatedly identified that an employee share ownership plan (ESOP) with a participation component outperforms one without a participation element.
Participation means that the employees take on the responsibility of their particular job as well as the accountability that goes along with it by participating in decision-making in their sphere of influence within the organization.
Participation is vital to an ESOP. In fact, the same studies have shown that ESOPs without employee participation might be worse than having no ESOP at all. This negative result has been calculated at upwards of 6% of reduced production.
Nevertheless, participation by itself does not result in significant corporate performance increases. It is only the combination of adopting ownership mentality and employee participation that yields the results sought.
How can a company best incorporate a participative element? The company must involve employees in any area of decision-making that directly impacts on their performance.
Not every employee should be made a manager. On the contrary, managers must become true custodians of their human resources, but at the same time, those resources must be given the trust and respect due to them so they can become involved in the growth of the company towards its goals.
12 Successful Strategies for Creating a Participative Environment
1. It is important to initiate a participative structure through communications with all levels of employees. A bottom-up approach to installation works better than a top-down unilateral dictated policy change.
For example, instead of a company indicating to employees that a quarterly meeting will be held to discuss the results of that quarter, each employee group would be allowed to decide how often they should meet to discuss what is important to them.
2. Participation is non-judgmental. This means that whether or not an employee decides to participate is an individual decision. Each employee must understand that through participation he or she is accepting the responsibility to improve the value of the company and, therefore, his or her own wealth creation.
Employees should understand that it is not enough to follow the rule book; rather the rule book should be expanded, so that if there are better ways of achieving results, they should be implemented.
3. Each company has a different corporate culture and communication model. Therefore, a participation plan must be tailored to meet each company’s needs. For example, in a high-tech company where many of the employees are working on Internet and intranet applications, communication should probably be through that source.
One ESOP client in a multi-media setting set up an Internet site just for communicating what’s going on in the ESOP and to ask for feedback and suggestions to improve the ESOP. The site is updated monthly with summaries of employees’ questions and sent out to all ESOP participants.
4. Decision-making must be encouraged at all levels, and difficult or positive decisions should also be rewarded and acknowledged. There must be some type of system in place to measure when a decision has been profitable and some reward for that profitability.
For example, if a company unit has had turnover problems and substantially cut its turnover due to specific decisions or actions, that unit should be rewarded depending on the compensation policies of the company.
5. An active role must be taken by employees. An engaged employee actively searches for, finds, and solves problems within the company to increase the profitability of the company.
6. Once a participative culture is implemented, communicated, and accepted by a work force, it is then a required expectation of all the employees. The longer a participative program such as an ESOP is in place, the more the employees get involved, and the impact on the workplace can be substantial.
First, employees who are not comfortable in a participative environment tend to leave the company, and people attracted to a participative, entrepreneurial company apply for the positions. So the nature of the work force actually changes to one that is more engaged.
7. Management must be aware that new skills may be required by employees in areas such as leadership, problem-solving, coaching, public speaking to groups, and so on. Many companies will institute training programs to improve the skill sets of their employees, not only in the area in which they are directly involved.
Having employees participate in speaking groups, for example, will allow them to expand their expertise and be more confident talking about the company in various scenarios.
8. As with any HR initiative, participation must be continually renewed with innovative ideas from the employee themselves.
9. There must be a clear understanding of the role and responsibilities of middle-management staff and supervisors.
For example, a detailed organization chart showing the roles and responsibilities will allow each employee to assess his or her position within the corporate structure.
10. There can be no system of responsibility without a system of accountability, including measuring results and their consequences. Reward systems can take many forms; they can be based on profitability, or increased revenues, depending upon the key performance indicators of value within the company.
Once those key value drivers are identified, a compensation or reward system can be put into place to reward those increases and drivers.
11. Participation means that employees must have access to the resources, such as time and mentoring, which lead to accountability.
12. Employees must become business literate within the context of their company and their interests. Many companies, once they have established an ESOP, implement open-book management policies, which increase their employees’ financial understanding of how their company works, how the company can increase value, and how the employee can affect that value.
— By Perry Phillips