There are many reasons why some companies choose a strategy that involves either employee ownership or profit-sharing. You may find that these practices can attract and retain employees, help them develop a sense of entrepreneurial motivation, and in some cases, gain a broader type of compensation for their work. In addition to being motivating, employee ownership can also help keep jobs in the community and support further economic development.
Including employee representation in high-level decision-making or governance can give some of the same outcomes as employee ownership, instilling a sense of pride, belonging and impact.
Employee representation in decision-making can bring valuable new perspectives to strategic decisions. If participation in executive meetings isn’t possible, suggestion boxes or other ways to gather informal input from employees can help give them a voice in the organization and ensure that you’ll benefit from their ideas and comments. Having regular employee representatives in executive meetings can provide a conduit for feedback and ideas from other employees.
- If input can be gathered anonymously, you may receive a wider range of information.
- Asking specific questions can generate more useful information. (“What’s the first thing you’d change if you were the CEO/manager?” is also a good question.)
- If you use an online platform for info-gathering, you may leave out employees with no access to online tools.
- Inviting employees to job shadow in management meetings and decisions includes employees’ perspectives and can also provide skills-building to employees who might not otherwise have such opportunities. Some companies ask employees to take turns participating in management meetings if they are comfortable doing so.
In addition to helping attract/retain employees, employee ownership can be used to buy out the current owner(s), raise needed capital, or share responsibility for the company.
- Combining employee ownership with decisions that affect their jobs can increase a sense of ownership and motivation.
- There are a number of structures to choose from, with ESOPS (Employee Stock Ownership Plans) and worker cooperatives being the primary ones.
- Certain legal structures affect the potential for employee ownership.
- In some cases, the ownership structure may save on taxes.
- In some cases, employee ownership can help keep a company and the jobs it provides in a community, and/or improve wages.
Profit-sharing can help motivate employees and give them a sense of ownership, and it’s a way to reward employees for the work they’ve done to increase the company’s profits. There are different methods of profit-sharing, from bonuses to allocation of shares in the company.
- Profit-sharing can be a way to align employees’ compensation with the company’s financial ups and downs, and it can provide more flexibility in economic downturns.
- Typically, an employee’s percentage of the profits may be based on factors such as seniority, level of pay, or attainment of specific profit-related goals (aka gainsharing).
- Profit-sharing puts a strong focus on profitability, sometimes at the expenses of other qualitative or value-related goals.
- It’s helpful to combine profit-sharing with open book management, to give employees an understanding of the company’s financials and help them fully understand how to maximize profits.
- Due to the company’s ups and downs, profit-sharing can cause uneven levels of compensation, which can be difficult for employees.
- Profit-sharing funds can be used for funding retirement plans.