5 Rules for Building a True Ownership Culture

5 Rules For Building A True Ownership Culture

In An Employee-Owned Company

Compared to workers not employee-owned, people working for an ESOP company have a...

92% higher
median
household
wealth

33% higher
income
from
wages

53% longer
median
job
tenure

*Survey data of workers age 28 to 34, Bureau of Labor Statistics

The evidence continues to mount that employee-owned companies simply perform better than their peers. They create more jobs, generate more wealth for their employee-owners, and then give back impressive amounts to the communities in which they operate. The more you talk to leaders from employee-owned companies, the more you begin to realize that getting people to think and act like owners doesn’t happen by magic: ownership needs to be taught.

But how do you do that?

OWNERSHIP NEEDS TO BE TAUGHT

There is a common belief that Employee-Ownership is all about owning stock. We hear it over and over again - “I gave my employees ownership but they just don’t seem to care.” Equity sharing certainly plays a critical role, but you don’t get an ownership culture simply by giving stock to employees. This thought process can lead to disappointment and misunderstanding.

People have to understand that they have a direct role in creating the kind of company they want. You want their brains as well as their skills to help build a great company. Teaching associates about how to think and act like owners continue to take a lot of work and intention. They need to understand that building a great company is their responsibility and the ultimate goal of their
efforts. That’s what ownership is all about.

While employee-owned companies need to follow all kinds of rules about issues like contributions, benefits, and taxes, there are no regulations that companies must share the basic financial information driving the company’s success or failure with their employees. And yet, we somehow expect employee-owners to make daily decisions that will impact the company and their fellow owners—even though they may not know what it means to run a business. That’s a
serious disconnect.

On the other hand, employee-owned companies who educate, empower, and engage their people; build the value of their stock, and deliver significant financial rewards to their associates, not simply because they created an ESOP. Instead, it was because they built a “Business of Businesspeople” who think and act like owners by teaching them the numbers, holding each other accountable, keeping score, and then sharing in the rewards (what we call A Stake in the Outcome).

5 RULES

EDUCATE Horizontal

BREAK DOWN
THE WALLS

Woman quote image2 (1)

How can we expect our people to think and act like owners without first understanding how business works, what’s critical to success, and how they can make a difference? An Ownership Culture is built on mutual trust and respect. You need to break down the walls and hype that make business an elite sport for the select few at the top that keeps everyone else in the dark and out of the money. And you can do that when everyone throughout the company is engaged in frank, open, and honest communication about the state of the business.

You have to show people that ownership means opportunity, not exclusion. That, with ownership, they can go as far as their talent, their will, and their energy can carry them. They won’t be blocked by class distinction, bogus barriers, or someone else’s decision to keep them out of the club.

You can create this dynamic by opening the books and teaching every employee-owner the fundamentals of financial literacy. The key is to help each associate establish a direct line of sight into how they impact their company’s performance and value.

When you open your books—really open them—you also open the minds of your employee-owners, and neither their minds nor your books will ever be closed again.

THE COMPANY IS THE PRODUCT

Educating employees about long-term planning and thinking is critical in maintaining the motivational power of ownership and
keeping the focus on what really matters. Employee-owned companies, for instance, need to educate their people about
how to balance short-term compensation and wages with the long-term potential of building wealth through equity in the
business.

The critical lesson to share is that the value of a business is more than efficient production, excellent customer service, ontime
delivery, and all the other things you think about operationally. You have to start looking at the business strategically to increase equity value. You have to think about improving its position in the marketplace.

The true profit of business is in building companies. If you sell a pen, you can make a penny. If you sell the pen company, you
can make $10 million. When you play the game of business at the highest level, you understand that the company is your
product, not the pen.

Wynette Employees are beginning to understand the impact that their actions and behaviors have on the numbers.

Wynette Bryant
Manager of Culture and Wealth, Evergreen Cooperatives

"We somehow expect employee-owners to make daily decisions that will impact the company and their fellow owners—even though they may not know what it means to run a business. That’s a serious disconnect."

STOCK IS NOT A MAGIC PILL

Just giving someone stock doesn’t mean they understand what they have. Stock won’t produce a company of owners or a culture of ownership all by itself. If people don’t recognize the opportunity they have to create some financial security for themselves and one another, they won’t be motivated by it.

Stock doesn’t change anybody’s behavior, at least not overnight. People don’t suddenly put their differences aside and join for the common good just because they’ve become owners. If you’ve spent your entire adult life focusing on a job description, it is difficult to stop thinking like an employee and start thinking about what is best for the company as a whole.

That’s why equity in the absence of business education, accountability, empowerment, and transparency often becomes stale and begins to generate a sense of entitlement on the part of the associates. The remedy is to empower people by encouraging them to take an active role in creating value for themselves.

TO MAXIMIZE EQUITY VALUE YOU NEED TO THINK STRATEGICALLY

When you teach people what it means to be an owner, you can use that as a vehicle to drive behavior change and promote strategic thinking. That, in turn, increases the company’s value, which drives the stock price up, which improves the quality of life and financial security for all the employee-owners over time.

To build a culture of ownership, you need to get the cycle of leadership development going —with people coming in, learning skills, moving up, and repeating. Setting up such a process is a long-term, arduous, often frustrating undertaking. While it takes a ton of time and energy, it is where all the rewards come.

What’s remarkable is that the more you teach someone what it means to own a business, the more they bring those same lessons back home with them—which only further transforms their lives for the better.

The bigger the pie, the bigger the individual slice.

IT TAKES A TEAM TO BUILD EQUITY VALUE

One prime place to look at how you can build an employee-ownership culture is SRC Holdings, based in Springfield, Missouri. The company started when it spun itself out of a former International Harvester plant in 1983, putting an Employee Stock Ownership Plan
(ESOP) in place early on. But while the people inside the plant knew how to make great products, no one had ever taught them how to make a great company. They didn’t yet understand that they could create wealth by building companies, not by selling products
and services.

With the practices and principles put in place by SRC’s founding CEO, Jack Stack, the plant turned into a business of businesspeople. The employee-owners at SRC came to learn that their company was their product.

SRC’s journey from a failing remanufacturing facility into a dynamic company with multiple divisions that now collectively employs 1,800 associates is well chronicled in The Great Game of Business and A Stake in the Outcome, books written by Jack Stack. In addition, the SRC Holdings division, The Great Game of Business, has shared these practices and principles with thousands of companies worldwide for almost 40 years.

For context, the shares in SRC’s ESOP have grown by an astounding 798,000% over the past 38 years. If you had invested $1,000 in the people of SRC back in 1983, you’d have $7.98 million today. Thanks to incredible growth in their ESOP shares, many workers who started at SRC in the early days are now retiring as millionaires. Now, it’s up the next generation to continue building on that success story.

The lesson the employee owners at SRC learned—and what every employee-owner should also heed—is that the bigger the pie, the bigger the individual slices.

Kevin Mauger-1 "The Great Game of Business is the perfect complement to sharing equity because it helps reinforce the sense of trust that comes from transparency and sharing everything. It provides the tools so that everyone can see how they can make a difference in the way the company performs."
Kevin Mauger,
NCC Automated Systems

OWNERSHIP IS ALL ABOUT THE FUTURE

What’s remarkable is that the more you teach someone what it means to own and operate a business, the more they bring those same lessons back home with them—which only further transforms their lives for the better.

The challenge is that people only begin to look outside their daily work routine—to get beyond doing their job and nothing else—when their motivation comes from within. Whatever goal you have—saving jobs, owning your own company, meeting this month’s profit target—if you don’t have it inside you, it ain’t gonna happen. You gotta wanna.

Learn more about the Great Game of Business and how you can use it to educate, engage, and empower your employee owners to create an ownership culture.

5 Rules for Building a True Ownership Culture

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