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Even though only 32% of employees admit to being engaged and a whopping 70% are on the verge of leaving, employee-owned businesses enjoy up to four times higher retention rates than other businesses. For many employees of employee-owned businesses, the big perk comes in the form of higher take-home pay and improved overall pay.
As a result, employee ownership has a venerable history of impact and wealth creation for workers. According to the National Center for Employee Ownership (NCEO), employees at employee-owned businesses tend to earn 33% more than employees at non-employee-owned businesses. The impact is even worse for minority workers, whose incomes can rise up to 12 times the median wealth of their peers nationwide. Employees from historically disadvantaged groups are faring just as well. According to a 2021 report from the Aspen Institute, single women and married women in employee-owned businesses experienced significant wage increases of 24% and 17%, respectively, and employees of color experienced significant wage increases as non-employees. Their counterparts were found to enjoy a 30% wage increase compared to owned businesses.
Add to this flexible work schedules, generous retirement plans, and child care benefits, and you have an “ownership flywheel” effect. Employees who are involved in a company’s success are poised to make vital contributions and drive improved performance. These actions, in turn, foster more resilient companies that are better positioned to weather economic downturns. This resilience was evident in the aftermath of the economic downturn caused by the global pandemic, with employee-owned companies in essential businesses cutting jobs at a quarter of the rate of their non-employee-owned competitors. went. This strong performance was undoubtedly driven by employees’ desire to remain invested in the business and their ability to take a long-term view of the business.
Related: Stronger Together: Why You Should Consider Employee Ownership for Your Business
Navigating the transition to an employee ownership culture
Whether you’re a small business leader considering succession planning and employee engagement strategies, or an owner with a vision to establish and lead a values-based company for decades. You may also want to dig deeper into employee ownership. For many companies, this setup is a mechanism to protect and strengthen the purpose, culture, and vision of the business they have built, while increasing employee engagement and motivation.
As you begin your research, remember that the success of your employee ownership plan depends on three key factors:
Factor #1: The right approach
Every company exhibits a variety of trends, from business models and industry trends to current leadership and company culture, that impact how best to set up an employee ownership structure. Therefore, it is essential that the form of employee ownership you establish is tailored to these dynamics.
Owners increasingly understand that employee ownership structures can turn into a competitive advantage for their businesses. Not only is it highly adaptable to the unique circumstances of each business, but programs can also be tailored based on targeted outcomes for incentives and rewards. In this way, the transition to employee ownership is structured to support all key business stakeholders and leverage the performance benefits inherent in an employee-owned business model.
For legacy-minded business owners who want to preserve the uniqueness of their business as they exit the business, employee ownership trusts (EOTs) are a great way to foster employee wealth and maintain the importance of a company’s mission. It provides an excellent opportunity to design an exit strategy that protects the most important aspects. . For example, his recent transition with Clegg Auto in Utah highlights how this model can be adopted to greatly benefit both employees and business performance. This innovative approach enables a shared rewards system, enables responsible succession planning, ensures continuity of company values and mission, and doubles profits within one year of transition. Needless to say.
Related: 4 ways to build a culture of ownership
Factor #2: The right funding model
You need to adjust your employee ownership financing strategy to strengthen your employee ownership goals. A good example is shown below. A key element of a successful employee ownership transition is for employees to understand and experience the substantial benefits of employee ownership. If an acquisition’s capital structure prevents employees from meaningfully participating in the company’s outperformance, it risks having a significant impact on employee morale, company culture, and retention.
WinCo Foods is a shining example of a company that got it right. The discount grocery chain transitioned to an employee stock ownership plan (ESOP) in 1986 and has achieved sustained growth primarily through employee retention. The company says, “Employee ownership means building a future while having a stable present. Our employees earn industry-competitive wages and long-term benefits from ownership of our company. “I enjoy investing as much as I can.”
To ensure that your deal structure incorporates best practices to best support your business and take advantage of the performance gains of employee ownership, you need a capital knowledgeable and experienced in structuring employee ownership acquisitions. Working with your provider is a wise strategy.
Factor #3: The right rollout campaign
After ensuring that your employee ownership plan design is truly bespoke and that the transition will be funded by a capital structure that aligns with your employee ownership goals, you need to be intentional and make sure everything is clear. there is. For some companies, implementing an employee ownership transition may simply be a natural extension of their existing corporate culture. For others, it may mean meaningful changes in the way the business operates and behaves.
Either way, you need to ensure that your employees are aligned with the core purpose, values and objectives of the transition and fully understand their role in the new business ownership structure. Everything from how and when to communicate the transition to what resources to provide to employees, to fully understand the new structure and their roles, all contribute to a successful employee ownership transition. Affect.
Related: Important Things Entrepreneurs Rarely Consider…Until It’s Too Late
This is so important that many business owners choose to work with organizations that can help them successfully roll out and implement employee ownership programs. This reduces the risk of damaging the trust you have built between your organization, its culture, and its employees through a rushed or poorly planned deployment.
Moving to an employee ownership model is more than just a change in business structure; it’s an investment in your company’s future and a catalyst for a culture of shared success. As a business owner, adopting this model will foster a perpetual cycle of engagement, accountability, and improved performance that will help your business stand out in a competitive marketplace. Each success energizes the spirit of collective ownership among employees and fosters further growth.
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