Allowing employees to own company shares is a powerful retention tool.
As employers seek to outdo each other with enticing perks to lure workers in an historically tight labor market, one benefit stands out for theoretically balancing out wealth and power among the workforce: employee ownership.
Allowing employees to own shares in the company can prove to be a highly effective retention tool as it enables workers to accrue equity and share in the profits.
Sharing wealth is arguably more egalitarian and powerful than more cosmetic perks, such as ping pong tables and kegerators in the office. In an age when the wealth gap between the CEO/owner and the rest of the workforce is widening, employee ownership can be a compelling gesture to staff of the value employers place on their service.
It is noticeable that companies which offer employee ownership tend to be in the construction, engineering and consulting trades. These are businesses that rely on highly-skilled people who are difficult to find and retain.
Swinerton Builders, a construction company with 1,800 salaried employees nationally, became employee-owned in the 1980s. The builder, which has roots going back to 1888, offers all its staff participation in an employee stock ownership plan (ESOP).
Staffers are paid annual bonuses based on company and personal performance. They are also paid the value of the equity they have accrued when they retire through regular installments.
More than 500 of Swinerton’s employees own voting shares in the company, which allows them to buy extra stock when they receive a bonus, as well as the option to vote on company decisions. Staffers receive voting shares according to the number of years they have been at the firm, as well as their performance.
Jason Chupp, a vice president at Swinerton, says the employee ownership structure means staffers tend to work harder and make better decisions for the company since they are directly reaping financial rewards from the profitability of the firm.
“If employees have skin in the game, they care more. Customers sense this, which leads to repeat work,” says Chupp.
Other companies have a different take on employee ownership. At construction services firm Charter Mechanical Contractors, a much smaller percentage of employees – 7% – own shares in the company. Staffers who can own shares must also pay for them.
President Cordell Tietz believes that because the company is owned by a group of employees the success of the business is driven by the “long-term approach and outlook” shared by the owners.
Others think a 100% employee ownership is more beneficial. The founders of Parametrix, an engineering consultant, granted ownership to their staff in 1992 before they retired.
Every employee receives a distribution at the end of the year based on a portion of their salary. The distribution is based on the firm’s performance and the amount goes up and down based on profitability. Last year, the company’s stock value rose 25%.
In addition to a 401(k), Parametrix, which has 520 total employees and 90 in Oregon, provides an ESOP that awards staffers 100% ownership in shares after six years of employment.
John Willis, a vice president at Parametrix, says the 100% ownership model improves client service because he believes all employees are committed to the success of the company.
The fact every employee owns stock means the culture feels egalitarian and is “highly collaborative,” says Willis.
Handing over ownership to staff can be a big, and some would argue, selfless leap for owners.
But it is also one of the strongest statements they can make that they would not be where they are today without their employees.
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