Achieving the Performance Potential of Shared Ownership
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Transcript Achieving the Performance Potential of Shared Ownership
Achieving the Performance
Potential of Shared Ownership
Vermont Employee Ownership Center
2012 Conference
Burlington, Vermont
June 8, 2012
Alex Moss
Praxis Consulting Group
Organizational Performance
Strategy
High
Performance
Culture
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Leadership
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Agenda for Today
Part 1: What’s Required, Why Do More?
What company financial information do / should
you share with employee-owners? Why?
Discussion
Part 2: How Can You Do It Effectively?
Getting started: outline of a sample program
Sample Exercises & Discussion
Turning education into action: participation
mechanisms
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What are Your Burning Issues?
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Learn what I don’t know
Magic potion
Employee wants to do what she can to help
Balancing rights and responsibilities
Culture through rapid growth
Help people believe there’s something of value to
them, not just to sellers
How to engage temporary employees to have a
stake in ESOP
Bounty for suggestions
Community building in workforce
Reengaging longer-term employees
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Part 1: What’s Required, Why Do More?
Legal requirements for financial disclosure
Research on employee ownership and
company performance
Your company goals: what do you want
“shared ownership” to do for you?
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Legal Disclosure Requirements:
The Framework
The ESOP Trustee is the legal “shareholder”
ESOP Participants are “beneficiaries” of a
benefit plan under ERISA
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ESOP Governance
Shareholders
ESOP
Fiduciary
Committee
Individual
Owners
ESOP Trustees
select
are
represented
by
ESOP
Participants
elect
Board of Directors
appoint and oversee
CEO / President
hire and oversee
Leadership Team
when meet
eligibility
requirements
hire and oversee
ESOP
Communications
Committee:
Promote
Ownership
Employees
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Implications
The ESOP Trustee receives all information
that is disclosed to shareholders
ESOP Participants have clear rights to view
certain ESOP information
ESOP Participants have very limited rights to
view company financial information
ESOP Participants have no operational
management rights
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Why Go Beyond the Legal Requirements?
Bottom line: employee-owned companies
perform better
Research supported by Employee Ownership
Foundation
GSS: layoffs during recent recession
Blasi & Kruse: impact of employee ownership on
company performance in privately-held firms
National public opinion survey
Other research: see NCEO summary
Ownership culture: strategies to link the fact
of ownership to actual performance
improvements
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The Role of Employee Ownership:
How does it add to the mix?
Sharing ownership by itself does not improve
company performance
Sharing ownership combined with
participation significantly improves decision
making and bottom line performance
Ownership Culture strategies link these two
factors
We wouldn’t be here if
If couldn’t work
If worked “automatically”
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Ownership Culture
Running your company so that employees
think, feel and act like co-owners
Employees at all levels
understand who decides what and why
have access to structures, training, information and
management support for participation
participate actively, effectively and appropriately to
continuously improve company performance
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How Do We Want Employees To Act:
Ownership Behaviors
“I’m going to do my own job really well &
responsibly”
“I’m going to react & respond to others in the
firm in getting their jobs done”
“I’m going to expect others to react and
respond to my needs in doing my job well”
“I’m going to think about the whole,
understand the bigger picture”
Courtesy of Don Hubbard, President, Niven Marketing
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Praxis’ Employee Ownership
Performance Cycle
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C
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Discussion Question 1:
Link to Your Strategic Goals
What are your strategic business objectives?
What impact do you expect ownership to
have in improving your company?
How do you want employee owners to act,
based on their increasing business
knowledge?
What information do you need employee
owners to understand? Why?
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Discussion Question 2:
Current Status
How well do your employee owners
understand the business and the financials?
What impact has this had on your business
so far? What are employee owners doing?
What works best today: tell a story about…
A specific company leader who “did it right”
A specific employee-owner who demonstrated that
they “get it”
Impact of employee initiatives on performance –
operating metrics, profitability, stock value
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Discussion Question 3:
Future Vision
Imagine that it’s 2015, and you are back at
this conference sharing your achievements
over the past couple years
What have you accomplished?
Leadership initiatives
Employee actions
The Gap: what do you need to do more of in
your company to achieve this vision?
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Part 2, How:
What are the Pieces?
Context
Setup
Initial planning
Initial education: building a knowledge foundation
Operational implementation
“Games” and other ongoing tools
Process improvement initiatives
Evaluation and continuous improvement
Future adjustments
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Context: It’s a Whole Process
Foundation: Leadership vision for how
ownership should contribute to achieving
strategic business objectives
Making it work: 4 categories of activities
Training, initial and ongoing – teach the rules
Communication – show the score
Incentives – share the win
Participation mechanisms – let ‘em play
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Initial Education:
Sample Goals
To engage employees in learning about our business
To build awareness of
The connection between your actions, the outcomes for our
company, and your rewards
Business and financial terms, so that you can be effective
consumers of financial information
Pay for performance, and the stock component of this in particular
How the ESOP works, especially in relation to other incentives and
stock plans
Balance between social responsibility and business objectives
To create readiness and knowledge necessary for future
implementation
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Common Approaches
Focus on financial statements
Start w/ dollar bill, carve up
Profit & Loss, Balance Sheet, Cash Flow
Case studies of where the numbers come from
and how the statements relate to each other
Examples
Companies
Commercial product example: the Accounting
Game / Lemonade Stand
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Praxis Template Outline
Initially: 3 sessions, 2½ hours each, 1x /
month
Session 1: Our Business, and How We Make
Money
Session 2: How You Benefit through Profit
Sharing, Ownership, Retirement Plans, Other
Incentives
Session 3: Factors That Drive Our Stock Value,
and What You Can Do To Affect It
Future: additional sessions and continuing
follow-up at departmental and corporate
levels
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Agenda for Session 1
Income & expenses: the personal view
Our business: the flow
Our Profit & Loss statement (P&L): tracking
whether and how we make money
“What if?” scenarios: the impact of changes
on our profits and stock value
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Exercise 1:
Personal Income & Expenses
Income
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Expenses
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Exercise 1:
Personal Income & Expenses
Two rounds
Round 1: Personal, your home budget
Round 2: Our Company
Questions
Where does the money come from?
Where does it go?
If there’s coming in than going out: what can you
do with it, and how/when will you get it back?
If not: what can you do about it?
Who decides, and why?
How does this relate to “value” and “wealth”?
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Exercise 2:
The Flow of the Business
Your basic business process: what are the
steps?
The exercise
List functions & attach employee names
Compare notes, pick 1 company
[Make photos, big enough to handle: ~ 11x17]
Put them in order
Relate to the P&L
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Other Exercises in Session 1
Product P&L: big enough to count, small
enough to understand
Whole company P&L: sum of the parts
“What if” scenarios: effect of operating
improvements on the bottom line, hook to
ongoing “games”
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Agenda for Session 2
ESOP & Benefit Sharing Overview: create it,
share it
How: Profit Sharing, Ownership, Retirement
Plans, and Other Incentives
Rules: how they work
Valuation: what all these plans could be
worth to you
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Agenda for Session 3
Our business strategy
Our value proposition: why people buy products / services
from us
Our Strategic Plan: where we are headed
Our stock value
How the market / appraiser values our stock
How you affect the value
Where to from here
What we want you to do: operating challenges &
opportunities
What other information you will receive: future education &
communications
Wrap up & graduation
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Other Sample Exercises
Constructing the Balance Sheet
Developing specific performance improvement
targets
Linking performance targets to the financial
statements to individual rewards
Reinvesting profits: Board of Directors exercise
Profits, book value and market value
Affect of investments, acquisitions, other growth
strategies – long term risk & reward
Future value illustrations (for ESOP, Profit
Sharing and/or other contingent benefits) –
sample employee and/or individual tool
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Keeping the Process Alive
Core education/training program
Targeted topics for leadership and/or “local” issues
More big picture – our business strategy, and why
More details – unit performance & improvement goals
Repeat for new employees
Adjust for new business / economic realities
Regular communication of performance issues and results
Participation structures so employees can use new
information and knowledge to improve performance
Integration with other short and mid-term incentives
Follow up:
“Building Long-Term Value: Developing a High-Performance
Ownership Culture”
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www.praxiscg.com/published-work/building-long-term-value-developing-high-performance-ownership-culture
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Effective implementation requires:
Accountability: whose job is it to oversee /
insure success?
Development: who will design it?
Trainers: who will teach it? How will they
learn?
Reinforcement: link to ongoing distribution of
key financial data
Repetition: how often?
Revision / continuous improvement:
incorporating new learning and keeping it
fresh over time
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Praxis’ Principles for Effective
Business Literacy Development
Simple
Concrete
Interactive
Enjoyable
Strategically integrated
Developmental
Just-in-time
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Discussion / Q&A
Any unanswered questions?
What makes this hard?
Other best practices in your companies?
What are your top recommendations – things
you would do now, if you were starting from
scratch, or things you wish you could do?
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Contact Information
Alex Moss
Praxis Consulting Group, Inc.
215.753.0304
[email protected]
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