We hear it all the time — “I want employees to think like owners”. This desire by business owners to align employee behavior with the objectives of owners often results in compensation and other incentive plans that mimic the financial results that owners receive. Stock ownership, options, stock appreciation rights, phantom stock, and profit sharing all provide employees with money and sometimes management authority. The idea is to encourage the employees to grow the company and share in the upside benefits of that growth.
Owners are often surprised, though, when the employees are not as enthusiastic as the owner about the plan. We must remember that employees are typically more risk averse than we are as owners. They like the idea of sharing in the upside — who wouldn’t? But often the plans also tie the employee to the company by requiring non-competes and only paying out if there’s an acquisition. The employee has little to no influence over the company’s decision to sell or a buyer’s interest in the company and the overall plan often limits the employee’s options when looking for a new job. Therefore, these tools alone will not necessarily create the alignment of employees’ behavior with owners’ objectives.
Employees care about themselves — as we all do. They need their job to support their own families and work toward their own financial goals and career dreams. However, feeling invested is a company isn’t always just about the money. Recent studies show that employees want to be a part of something bigger than themselves. Being an owner definitely provides that opportunity, but how do we translate that intrinsic desire into their loyalty to the company?
The feeling of belonging comes from an alignment of values and goals. Financial incentives structured as “synthetic” or actual stock ownership that also promotes those goals may be helpful in retaining key employees. However, the key is in the connection to the business — the opportunity to grow professionally and the personal satisfaction from the work and a trusting relationship. The “ownership” piece is important but not in the way we “owners” think about it. Give them “ownership” in the cause and the result and you’ll create a real alignment that will serve you, your business, and your customers.