How the best companies enact an ownership culture that propels them forward
Every year, around 400 of the best and most successful U.S. companies vie against one another to make it onto Fortune’s list of the ‘100 Best Companies to Work for in America’.
In addition to the prestige of being named in the announcement via the well-respected magazine, inclusion also enables companies to attract better talent as well as retain and motivate current employees.
Silicon Valley companies are fighting especially hard for new talent and to retain in-house expertise, according to Sheila Frierson, president of Plan Managers, North America, at global share plan provider Computershare,.
“Companies want to understand whether their benefit programs match or even exceed those of competitors,” Frierson said.“They are especially minded to take good care of high-performing executives, and an increasing number want to ensure that all of their employees feel that they own a stake in the company’s future.”
A recent joint survey between Computershare and WorldatWork revealed that 59% of HR teams are increasing the amount of time they spend on the financial well-being of workers.
This perhaps isn’t surprising given that the cost of recruiting, training, and integrating new employees means that many HR and people departments are under pressure from management to reduce turnover.
Our research based on applicants to the Fortune “Best 100” list conducted with the Great Place to Work Institute in San Francisco indicates that employers who combine a generous equity plan with an empowering culture can cut voluntary staff turnover by a third — from 18% to 6%.
By contrast, 15% of employees without access to equity plans and a supportive corporate culture say they are likely to leave their jobs during the next six months.
But our analysis also revealed something else: companies with more extensive employee ownership and profit or gain sharing schemes had higher scores on The Great Place to Work Institute’s Trust Index, which is based on workers’ views of their company’s corporate integrity, respect, pride and camaraderie.
Companies with more extensive equity plans and the most supportive corporate culture had the highest scores, especially those with plans that create profits that add significantly to annual salaries. A recent study by Arizona State University suggested that workers participating in Employee Stock Purchase Plans can be on average $3,000 a year better off: the equivalent of a 5.4% wage increase.
Creating a participative culture
Public opinion surveys, studies and other research published over the last four decades also have consistently suggested that it’s not just about giving workers more access to money via equity. Successful companies often combine equity plans with participative cultures that enable employees to play a role in their future as well as encourage employees and managers to co-operate over the long term.
Consistent with an early study by the General Accounting Office of the U.S. Government (now the Government Accountability Office) which initially found that productivity increased more in employee stock ownership plans that were combined with a supportive culture, our recent research strongly confirmed once again that companies that offer equity plans in combination with a supportive culture and participative work practices still have the biggest payoff when it came to reduced turnover and higher equity return.
Markers of a participative culture include: giving workers responsibility, encouraging problem-solving teams, providing training, sharing company information, focusing on coaching as opposed to imposing a strict hierarchy, and paying workers at or above the market rate for their job type and region.
Such HR practices are especially important in today’s workplace, which values ingenuity and innovation to enable a competitive advantage.
Benefits of getting it right
The benefits of combining employee stock ownership, profit sharing and supportive working practices are significant.
Research also shows that when workers have access to broad-based capital plans, 26% make a suggestion at least once a month, compared to only 18% among workers without shares.
In a study we did as part of the National Bureau of Economic Research Shared Capitalism Project, 58% of workers with a high level of broad-based equity plans reported greater loyalty to the firm compared to 46% of workers with low levels of such shares.
A survey by the national General Social Survey found that 44% of workers with a high level of broad-based equity plans reported a strong sense of company pride compared to 29% of workers without access to employee stock ownership or a share in profits or gains.
Furthermore, all these benefits are additional to established tax advantages of equity plans, which vary according to type.
The virtuous circle of monitoring
The national General Social Survey also shows that workers with access to employee stock ownership, profit sharing or gain sharing are more likely to monitor — and even try to help — non-performing workers.
The survey found that combining improved HR practices with different forms of employee share ownership creates the kind of ownership culture that encourages co-monitoring which helps ensure that hard work becomes an expected norm for all workers.
These kinds of practices include: creating teams, enabling workers to have a high level of participation in decision-making, respectful treatment of workers by supervisors, formal training, creating a better sense of job security and, of course, better pay.
By comparison, workers eligible for large individual bonuses were less inclined to try to help an underperforming co-worker.
In short, rewarding teams induces co-operation and leads to the willingness of workers to try and help others get better.
A lot of companies spend a lot of time worrying about the competition and the exact mix of compensation programmes to attract and retain senior managers.
However, recognition is not just about the board, executives, or the top 20% of workers. To improve the overall performance of the workplace, companies need to extend participative HR practices to more workers. They also need to enable more workers to access equity and share in the performance of the company. This will help create a culture that values the contribution of individual workers and encourages co-worker monitoring and support.
If more companies did this, we’d likely all be a lot richer for it.