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Tag: Employee Stock Ownership Plan

Building a Strong ESOP Employee Culture: Five Lessons Learned for Success

You take better care of your own car than a rental car, don’t you? This question was posed to me at the beginning of our company’s Employee Stock Ownership Plan (ESOP) journey and it was the lightbulb moment for me regarding the difference between working for an employee-owned company versus another type of business ownership structure. In the world of business, just as in life, ownership breeds responsibility, and responsibility, in turn, breeds excellence.  Employee Ownership, through ESOPs, fosters a profound sense of stewardship that empowers each individual, not merely as an employee but as a part-owner vested in the company’s growth and success.

READ: Five Lessons Learned from a Successful ESOP Transition

An ESOP is an employee benefit plan that gives workers ownership interest in the company in the form of stock shares. There are less than 6,500 ESOP-owned firms operating across the United States. While they offer significant benefits for companies, the benefits for employees are even greater. Success is imperative upon a strong ESOP culture — one that is designed, implemented and maintained through a variety of strategies. Here are five best practices to build a strong ESOP employee culture.

Lean on company values

Transparency, open communication, and collaboration build strong ESOP cultures. Highly engaged staff are motivated by meaningful work that makes them feel valued. Inclusion also grows ESOP cultures. Teams should treat each other with respect and engage in authentic discussions, show genuine concern for their colleagues and resolve conflicts effectively. Creating this kind of ESOP culture means that employees will expect and value this within themselves and their colleagues and perpetuate this throughout the organization over time.

Organize an employee ownership team with representation across all offices and positions

This group can help to execute your strategic initiatives at the board level while also serving as a conduit between people and leaders. This group should be passionate about their roles as employee-owners and highlight the privilege around this type of company structure. The ESOP team should provide regular opportunities for people to ask questions and be a listening ear for employee concerns. 

Provide education opportunities

ESOP business models are complex. It’s important for your people to understand why your organization has an ESOP and how shares are valuated, allocated and distributed.

For example, look at building a set number of responsibilities of an employee-owner, and incorporate them into orientations and performance appraisals so that people are consistently reminded how their everyday actions provide value to our firm as a whole. Quality client interactions and deliverables all create value for an organization. Consider training for every person regardless of their level or firm tenure. Education is fundamental in ESOP cultures, but it’s equally important to remember that this education revolves around empowering principles: when you educate employee-owners, you’re fueling their sense of ownership and, therefore, their commitment to collective success. In essence, when we equip our teams with knowledge, we are igniting the power of employee ownership.

READ: Navigating the New Era of Employee Engagement — Everything you Need to Know

Provide engagement opportunities

Employee ownership is worth celebrating. Be sure to share reveal parties when the annual evaluation of the company’s stock is published and organize fun events during October’s employee ownership month. Thank employee-owners for their contributions through recognition. It’s important to engage your staff’s families as well. An ESOP is a long-term wealth-building benefit for people and their families and having significant others understand the positive benefits contributes to retention. 

Look for existing systems that you can improve

Where you can, add or improve language and process around ownership and ESOP culture. For instance, in your recruiting process, evaluate potential employees to which you offer a position with the lens of adding this person as a co-owner. When making offers, invite them to be an owner of the firm. Review your financial practices, and consider open-book financials so that at any time staff can see how your company is performing, highlighting transparency and responsibility.

A company’s ESOP success is dependent on each person at the company. While there are several practices that go into building a strong ESOP employee culture, these tips resonate most and can have a meaningful impact on your company’s success and growth.

The bottom line

Cultivating a strong ESOP employee culture isn’t merely about increasing productivity or profitability.  It’s about shaping an organizational ethos that emphasizes collective success, shared responsibility and mutual respect. The power of employee ownership lies in its capacity to transform the way individuals perceive their roles within the company — not as expendable cogs in a machine, but as integral parts of a thriving ecosystem that they can influence and shape through their efforts.  Therein lies the profound beauty and transformative potential of ESOPs.

Aimee DuffyAimee Duffy is the director of human resources for Design Workshop. For more information, visit www.designworkshop.com or connect with Aimee directly via email at: [email protected]. 

 

 

 

 

 

Jason Wellman

Jason Wellman is director of ownership culture at ESOP Partners. For more information visit www.esoppartners.com or email Jason directly at  [email protected]. 

Five lessons learned from a successful ESOP transition

In 2020, amidst the COVID-19 pandemic, new working models and general uncertainty, Design Workshop became 100% employee owned through an Employee Stock Ownership Plan (ESOP).

Under this plan, ownership of the company is held in an ESOP Trust, is funded entirely by company contributions, and all employees are enrolled upon meeting eligibility requirements.

This is designed as a long-term retirement benefit, with the employees’ accounts increasing as the value of the business increases. Not only does an ESOP provide long-term wealth building opportunities for employees but it offers a clear succession plan for organizations creating a framework for ownership transition.

With approximately 6,700 ESOPs in the US, being an employee owner is a special opportunity for staff. ESOPs naturally cultivate a culture with a collective interest in the growth and success of the organization. When the company succeeds, employees directly benefit. This drives employee performance. For organizations in industries such as landscape architecture, where company success is dependent on employees consistently delivering high quality results on projects, a shared commitment to excellence is vital. An ESOP rewards this excellence, making it a natural choice for Design Workshop.

This April marks the one-year anniversary of Design Workshop’s transition to becoming 100% employee owned. Despite navigating a global pandemic and a mostly remote working environment, it’s been a successful transition because Design Workshop took the actions outlined below to prepare.

Understand Your Organization and Plan Ahead

Design Workshop is built on client service. The firm thrives on long-term relationships and delivering solutions to our client’s most challenging problems. Connecting the firm’s values to the business helps employees share the long-term success with all. Take the time to understand ESOP structures and evaluate how they align with your culture. Identify the team who will lead the effort, regularly meet and assign responsibilities. This group will drive the conversion process. Make sure that your current shareholders understand the transition and its impacts.

Educate Your Transition Team

There will be a vertical learning curve for the team assigned to manage the ESOP transition. Utilize existing resources to help you navigate the process. The National Center for Employee Ownership and The ESOP Association are just a couple of entities that provide resources and tools for ESOPs around the nation.

To help advise and facilitate the ESOP conversion process, assemble a professional team of ESOP conversion experts. Take the time and interview consultants to ensure you find the best fit. It may be expensive but executing the transition properly is worth additional funding.

A successful ESOP transition team typically includes: ESOP attorney, ESOP Independent Trustee, Valuation Consultant (engaged by the Independent Trustee), Corporate attorneys to assist with shareholder buyout documents, Accountants, a Third Party Administrator, Communication consultants and a bank (if external debt will be needed).

Engage Your Internal ESOP Team

Assemble an internal ESOP team focused on providing employee owners with educational opportunities, resources, and assistance that increases the common knowledge of the ESOP. This group will play a critical role in educating your employee owners. They will act as internal advocates for staff and further develop the teamwork, communication, positive and productive atmosphere and creative thinking amongst all employee owners.

At Design Workshop, we used an application and interview process to assemble our internal ESOP team. After serving for two years, an ESOP Team member relinquishes their spot on the team to give the opportunity to someone else. This group is given the autonomy to create their own education and engagement calendar and provides a monthly update to our Board of Directors.

Communicate with your Employee Owners

Our shared investment means that we are all dedicated to continuing to collaborate and provide value to our clients. We continue to educate our employees about their important role in the firm and what the ESOP means to them, both now and well into their future. Our ESOP team developed our firm’s “responsibilities of an employee owner” which serves as a code of conduct and communicates expectations to our staff.

Develop and Grow Your Culture of Employee Ownership

How you-develop your culture of employee ownership defines the personality of your organization. Make it fun! There is an incredible opportunity for employee pride to grow when they own the company. The ESOP Team can manage an education and engagement calendar for the organization to consistently spread your key messages. Involving spouses, partners and kids gets families involved too. Take advantage of National Employee Ownership Month in October to offer exciting programming.

Aimee Duffy Design Workshop Aimee Duffy leads Design Workshop’s people initiatives across all studios as Director of Human Resources. She is responsible for all HR processes including talent management, compliance, benefits, learning and development, performance management, as well as employee relations and engagement. Aimee is PHR and SHRM-CP certified. She holds a Bachelor’s degree from Saint Michael’s College and a Master of Strategic Human Resource Management from the University of Denver and belongs to World at Work Society and the Society for Human Resource Management.