Performance Ownership: A Roadmap to a Compelling Employment Brand

1. Performance Ownership: A Roadmap to a Compelling Employment Brand From Compensation and Benefits Review Jan/Feb 2000 Presented by Andrea Phillips and Alyssa Phillips

2. Transforming employees into owners • 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.

3. Beginning Building Block • 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.

4. "Getting the best deal" • 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.

5. "Stock options are like the lottery…” • 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%.”

6. 7 Key Factors to Ownership Culture • 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:

7. 1) Financial Ownership • 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.

8. 2) Meaningful Work • 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.

9. 3) Business Information • 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.

10. 4) Employee Involvement • 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.

11. 5) Leadership • 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.

12. 6) Performance Feedback • 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.

13. 7) Career Management • 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.

14. Developing an Employee 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.

15. Establishing the Business Direction & Financial Incentives • 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.

16. The Creating of Meaningful Work • 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.

17. Building an Understanding Among Employees of the Business • 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.

18. Creating a Performance Feedback Process • 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.

19. Building Effective Employee Involvement • 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.

20. Investing in Development • 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.

21. The Process Toward Onwership • 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.

22. Take-Away Points • 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.