From Compensation and Benefits Review Jan/Feb 2000 Presented by Andrea Phillips and Alyssa Phillips.

From Compensation and Benefits Review

Jan/Feb 2000

Presented by Andrea Phillips and Alyssa Phillips

In 1992, William M. Mercer, Inc. did a survey of 350 US companies, finding that 17% had a broad-based stock ownership program.

Repeating the survey in 1996, it was found that this number had increased to 30%. By ‘97, it was up to 35%.

The Employee Ownership Index was developed in 1992 and subsequently given to an investment banking firm to maintain.

The EOI tracks 350 stocks in companies with 10% or more of the stock in some form of broad-based plan.

The beginning building block is to construct the right financial ownership structure.

Financial ownership is critical, but not sufficient.According to Joseph Blasi of Rutgers, “The

evidence shows that it is largely the participation and cultural influences, when combined with ownership, that improve the financial performance of a firm.”

Employers want to attract talented workers who are committed to the company and are highly productive.

In some situations, financial ownership alone can create the opposite of the behavior desired in these organizations.

Stakeholders may look for where they can get the best deal instead of being concerned with the long term success of the organization.

Employers need to motive long-term commitment and not short-term self-interest.

Jeffrey Pfeffer stated that “stock options are like the lottery. People are hoping to strike it rich and then quit.”

“Loyalty isn’t dead, but toxic companies are driving people away. There isn’t a scarcity of talent, but there is a growing unwillingness to work for toxic organizations.”

“Companies that manage people right will outperform companies that don’t, by 30% to 40%.”

These 7 integrated factors align, equip, and energize employees to take responsibility, individually and collectively, for their performance.

Specific tools are set in place to help create an outline that is like a building resting on a set of pillars.

The following are the seven integrated tools:

Not sufficient, but still necessary is having some recognized common stake in the financial ownership of the organization.

Effective financial incentives create opportunities for reward and a linkage between individual performance and organizational success.

Employees need to see the correlation between their jobs and ultimate business success to create passion and excitement to drive ownership behavior.

A true owner truly cares about all aspects of a business and its ability to be successful such as its products and services, customers, and their impact on the bottom line.

This may be one of the most important pillars to ownership.

Access to information and a solid understanding of the business drives ownership.

Effective ownership is driven by frequent communication providing an in-depth understanding of the business, its industry and the future of both.

Employee involvement is critical in creating commitment.

Employees need to be able to make meaningful decisions and have input into those decisions.

Employees use their knowledge and commitment through involvement in core business issues.

Speed and quality come through committed, informed employees acting in the best interests of the customer and the company.

Leadership sets the direction and initiates the actions to create an ownership culture.

Vision and environment can be created by leaders so employees can make informed decisions.

Leaders provide direction, knowledge, and support to help employees to chose wisely.

Constant feedback develops ownership by telling employee’s about their individual contribution to success or failure.

Feedback drives performance and long-term survival by correcting behavior and drive continuous learning.

In order to be effective, feedback needs to couple individual and organizational feedback processes.

Ownership is sustained by evidence of the organization’s long-term commitment toward employees.

Training and development is an important investment to help employees build long-term solid careers. This is another building block in the ownership culture.

A number of programs may be initiated to create an ownership culture.

By diagnosing their own specific situational environment and business strategy, an organization can determine its best course of action to strengthen its ownership culture.

Leadership fully committing to building psychological ownership among an organization’s employees is the first step in employee ownership.

Financial incentives must be based upon measures of organizational performance that capture the essence of the business.

Financial incentives and business strategy must be aligned in order to foster ownership among employees.

Designing jobs in a way that employees and teams can own a piece of the work is a key factor in creating ownership.

Without accountability, there can be no ownership.

Coupling challenging work with accountability contributes to a sense of ownership and pride in the work and eventual outcomes.

Financial incentives programs often fail to create ownership when employees do not understand the business measures or how they impact them.

Critical to overcoming this common pitfall is building an understanding of the industry and the key business measures among all employees.

Broader knowledge provides the foundation upon which employees can influence the direction of their work.

Designing an ongoing organizational feedback process contributes to true ownership.

It is important for employees to be able to understand what factors impact organizational success and how the company is truly doing.

Employees treat a financial incentive system as a benefit or entitlement instead of something to be earned without a performance feedback system.

It is important to build processes to allow employees to use their skills and abilities.

Creative input from employees and effective implementation of those good ideas helps in any organization’s success.

Without the ability to impact decision making, employees do not achieve the ownership qualities of accountability for their actions.

Organizations have to know how to adapt to new environments and changes.

Knowing what king of capabilities that are important and provide feedback to employees is critical for organizations to understand.

The organization and individual must commit to each other to achieve performance.

Is a process of cycling back and building upon the prior steps as further levels of ownership develop.

Building ownership requires a balanced integration of all these pillars.

Building employee involvement and strong work processes does not create the strength of ownership that comes with financial impact or consequences.

It is necessary for organizations to follow the outline given in the article when developing an ownership system for their employees.

Make sure the employees are truly committed to the company and are concerned in the success of the company in the long run, and not just in the short run.

Stock ownership in organizations continues to be a growing trend, as many employees see this as a benefit to be earned by their hard work.