Employee Ownership: A Gift That Keeps on Giving

The holidays are over and exhausted employees have returned to their everyday work routines. The season of celebration can only last so long, because even fun can be overdone. However, the spirit of giving doesn’t have to stop with a calendar date.

Just last month, one group of employees received a gift that not only keeps on giving year round, but possibly for a lifetime. Beginning in 2013 the 400 employees of a successful grocery chain will officially become the owners of the business. Joe Lueken of Bemidji, Minn., while planning his retirement, decided to give his company — Lueken’s Village Foods — to his employees, after shockingly turning down lucrative offers from large chains in the process.

Lueken realized that his employees were the ones “largely responsible” for his success and he wanted them to benefit from their years of hard work and loyalty. His employees participated in an employee stock ownership program (ESOP), a stock equity plan in which they form a trust and purchase shares of the company through payroll deductions. However, Lueken didn’t request a payment for company shares; he gave his company to the employees for free!

Granted, most people can’t afford this type of extreme generosity, but Lueken’s decision was grounded in the belief that the behaviors of his employees should be rewarded. Now there’s a novel notion! Rewarding the right behaviors results in success for not only the employees but for the business.

According to the National Center for Employee Ownership (NCEO), approximately 28 million Americans own employee stock through various mechanisms: ESOPs, options, stock purchase plans, 401 (k) plans. With ever-changing government regulations and restrictions, company leadership may find it difficult to wade through the pros and cons of what are commonly known as benefits. And there’s the rub: once organizations use employee stock options as part of a compensation package, does it affect performance or only tentatively assure employee retention?

An NCEO article, “Research on Employee Ownership, Corporate Performance, and Employee Compensation” stated the following findings:

Generally, the results show that ESOPs make a significant contribution to corporate performance, particularly when combined with management styles that stress employee involvement in decision making at the job level and sharing financial information with employees. Data for broad-based stock options also paint a positive picture, although the results are somewhat more ambiguous.

Basically, when leaders share information, invite and act on employee suggestions, and in so doing give employees true ownership, company “benefits” become an actionable item that employees know they can impact through their own behavior. The best such programs would include a measurable performance contingency for participation.

In 2010, Bob Moore gave his multimillion-dollar business, Bob’s Red Mill Natural Foods, to his 209 employees via an ESOP plan. The plan makes any worker with at least three years of tenure fully vested in the company and these employees will receive cash from revenues when they quit or retire. I’m willing to bet they will work to ensure that the company remains successful.

Employee recognition, reward and engagement come in many different packages. For example, in 2011 Naveen Jain, the CEO of Intelius, initiated an employee competition that rewards employees with checks ranging from $2,000 to $50,000 for ideas on cost-saving measures and new products. Tech CEO Markus Person distributed $3 million he collected from company stock dividends to his employees.

Years ago the owner of a company that specialized in gas station construction in Atlanta was nearing retirement and decided that he should give employees a chance to earn more. He decided that he would give the employees constructing a station a budget and anything they saved would be divided among them. Not only did the employees earn huge bonuses, but the owner’s profit increased significantly as well even when his intention was to downsize his earnings.

I have a strong feeling that all of these employers and leaders didn’t suddenly have a fit of generosity. They have probably practiced positive behavioral management skills throughout their careers — requiring specific contingencies for recognition, reward and celebration — and doing so has made them and their employees successful. We can’t always make the grand gesture, but when we show sincere appreciation for employees and peers, even the smallest gestures become grand. As Lueken stated, “You can’t always take. You also have to give back.”

It really is true that the more you give, the more you get. The leaders who realize this simple truth and act on it with a scientific understanding of behavior soon learn that the giving comes full circle.

Read about how we supported The Bob Barker Co. in “Giving Them the Business: Generating Performance That Pays.”