Job Security, Thy Name is ESOP

“You don’t build a business – you build people – and then people build the business.” – Zig Ziglar

If the COVID-19 pandemic taught us anything, let it be this: Our economic fortunes can change on a dime.

A vibrant, bursting business climate hit the skids. Millions were suddenly out of work. Many, many others were introduced to a new reality of working from home.

Fortunately, conditions have improved. As the economy strengthened, though, large gaps in the workforce appeared. Some analysts had predicted a labor shortage. They were correct.

Employees are in the driver’s seat, largely able to pick and choose jobs. The environment seems entirely in their favor.

One insecurity lingers, though, for many workers. The pandemic was the second economic earthquake they experienced.

The 2008 recession delivered the first hard lesson in employment insecurity. COVID-19’s upheaval, just over a decade later, reinforced the notion of “you never know.”

Even employees who kept their jobs watched co-workers, or friends at other organizations, lose theirs. If they hadn’t previously thought about job security, it quickly became top of mind.

The notion of job security as an employee magnet has taken on increasing cachet. If your company was structured in a manner proven to help retain workers, wouldn’t this help you attract more?

Employee stock ownership plans (ESOPs) have the proof.

Job Security

A 2020 study conducted by Rutgers University and the SSRS survey firm found that ESOP companies provided tremendous job security for their workers during the pandemic. “Employees were retained at significantly higher rates by employee-owned companies during (the) pandemic,” it states.

The study’s numbers speak for themselves:

  • ESOPs were better than 3-1/2 times more likely to retain non-managers, and nearly four times more likely to retain managers.
  • Employee-owned companies experienced less than 25 percent the rate of job loss as non-employee-owned firms.
  • The majority of ESOP firms suffered an average 4.8 percent decline in total employment, compared to nearly 20 percent at other organizations.

The study noted another effect of ESOPs largely bucking the layoff wave: “Just as importantly, by maintaining employment at a higher level, ESOPs ensured that more employees had reliable and consistent access to key employer-sponsored benefits, such as retirement and health care. When employees’ hours are cut significantly, they can become part-time workers and lose these key benefits. Especially in a pandemic, the loss of health benefits could cause employees and their families to experience health and financial catastrophes.”

What is an ESOP, besides an ownership exit strategy that rewards employees and allows majority shareholders to stay involved? Clearly, based on this study’s findings, a strong shield against economic headwinds that batter employment at most organizations.

Could an ESOP help your company in the battle for talent, by offering prospective employees far more job security than found elsewhere?

Our next post will look at how employee pay fared at ESOP companies, vs. others, during the pandemic. Again, the results are stark.

If you’d like an answer to the question just posed, though, contact Excel Legacy Group to learn more. In an economy haunted by job insecurity, offering a proven alternative might open your door to even more (and better) employees.