Do More With Less … With an ESOP

Employee Productivity, Part 3

“Doing more with less, is a crucial principle to learn; especially if you’re going to be in business in this rapidly changing world.” -Robert Kiyosacki

“Sharing” is a principle usually learned at a young age.

Share your toys with other children. Share your food (it’s rude to eat in front of others). Share a ride to save money. Share your resources to help others who don’t have as much.

In the often hypercharged world of business, though, the notion of sharing frequently takes a back seat. No sane company would share its trade secrets with a competitor. Market share, usually gained after years of brand building and elbow grease, isn’t shared willingly. Investors often seek no-load or no-fee securities, hoping to minimize shared returns with brokers or advisors.

Companies might rethink the value of “sharing,” at least internally. Putting this principle to work in-house can unleash many benefits.

As detailed in an earlier post, an oft-overlooked avenue for businesses to grow their organization, and make more money, is to increase employee productivity. Our last post explained how an ESOP achieves this, by offering “skin in the game” to workers.

What is an ESOP?

In ESOP companies, a share of the organization’s ownership is vested in its employees. There’s no cut-and-dried formula for “how much.” The company creates a trust fund to which it contributes shares of its stock. The shares are allocated to individual employee accounts.

In other words, those who own the company share the pie with workers. They take less of the total ownership, so employees can participate. More than 6,600 American companies use Employee Stock Ownership Plans (ESOPs).

So how do these firms typically fare after embarking down the ESOP path?

According to a famed Rutgers University study, ESOPs increase sales, employment and sales per employee by nearly 2.5 percent every year, compared to similar non-ESOP organizations. Think greater employee productivity might be a factor?

ESOPs are vastly overrepresented in the annual “100 Best Companies to Work For” list, compiled by the Great Place to Work Institute. Research by the National Center for Employee Ownership found that, over a three-year period in the early 2000s, fully one-sixth of the 780 companies that applied for the list had ESOPs. If one believes that happy employees are more productive, then an ESOP could be key to unleashing their latent energies.

By accepting a smaller piece of the entire ownership pie via an ESOP, a company’s owners can boost worker productivity, and overall company fortunes. Sounds suspiciously like “doing more with less” … simply by sharing a part of ownership with workers, who respond positively to the financial windfall and management goodwill.

Do more with less

Wondering how an ESOP might help your organization do more with less? The principle is simple. The first step is to inquire. Contact Excel Legacy Group for a primer on ESOP planning, and its myriad possibilities.

In his famed book, “All I Really Need to Know I Learned in Kindergarten,” author Robert Fulghum places “Share everything” atop his pile of pearls of wisdom. Smart advice … especially as sharing, via an ESOP, can be an integral part of conquering the “do more with less” mantra for many, many organizations.