The Great Resignation is making many employers nervous about the future of their businesses. With 38 million workers leaving their jobs and 25 major companies experiencing employee strikes, 2021 highlighted a major labor shift in the U.S. Companies, however, are far from powerless in this shift and can use several tools available to them to ensure they are seen as an “employer of choice.” Offering company stock to your workforce can be one effective way to retain your best employees, motivate your workforce, and attract top talent. Learn about the three top challenges for private businesses when establishing broad-based employee stock programs, plus the opportunities these challenges can create.
Challenge 1 – Longer-term thinking is frequently challenged by management
Employees understand equity; they frequently ask for it in job interviews and value being considered an “owner.” For many, equity can make the difference between accepting your offer or your competitor’s offer that includes a longer-term view of their employment and an opportunity to share in the upside success of the business. To attract and retain talent, stock or profit sharing should be accessible for all employees, not just the top 10 people (or 10%) at the company.
But there is resistance. Institutional shareholder groups are sometimes hesitant to support broad-based employee stock programs for non-high-tech, Silicon Valley-style companies, which can keep a lot of businesses from pursuing them. There are three main reasons why institutional shareholder groups are hesitant to support these programs:
- Lack of understanding: Shareholder groups often don’t have a vision of how this type of program would work and see it as a waste of resources and stock dilution.
- No immediate proof of effectiveness: Many shareholder groups want to see a direct correlation between an effective plan and immediate financial results to justify the cost. It is difficult to see an immediate ROI when key performance indicators may take time to measure. With time, the current labor crisis could provide more data on retention and attrition before and after the adoption of an employee stock plan.
- Market fluctuation: Many companies are concerned that when the market fluctuates—which it will do—employees won’t understand the macroeconomic forces at play and will consider the stock plan worthless. While this is a risk, good financial education and communicating a strong business strategy will allow employees to see the plan as a long-term play instead of short-term cash.
Opportunity: Your business could be on the cutting edge in its response to the Great Resignation. Attracting new talent and retaining your current employees by sharing a small percentage of the company’s success can determine whether you can continue to operate. Very few businesses can be successful without a committed and robust employee base, so invest now to create a prosperous future for your company.
Challenge 2 – It takes education
Explaining how the program works, what is expected from the employees, and why the company is implementing it is key. Education upfront is always important, but so is consistent messaging from leadership throughout the life of the plan.
When Bank of America launched their “Take Ownership” plan in the late 1990s, the CEO included the phrase “at Bank of America, we take ownership” in every speech and communication, whether to employees, shareholders, or customers. The stock plan encouraged employees to take ownership and make the best decisions for the company every day, a fact that they were reminded of each time the CEO spoke.
When employees take ownership in the company, they are more likely to be invested and advocate for their business. A well-known example of this was a PepsiCo employee who was living in Georgia and had a child playing in the Georgia Little League Championships. In a state dominated by Coca-Cola, this employee advocated for Pepsi products to be sold at the Little League Championship Games. This story made its way up to the CEO of PepsiCo, who reached out to the employee, thanked them, and then asked this employee why they had thought of making this suggestion. The employee said that they felt this responsibility because they were an “owner” in Pepsi. The CEO quickly realized he had thousands of Pepsi ambassadors able to make small changes in their communities that could have a great impact.
Opportunity: When employees understand the stock program, they are empowered to take ownership and pride in their workplace. Employees who feel this sense of loyalty are less likely to “job-hop” and generally make better decisions for the benefit of the company. This presents an opportunity for companies to retain quality talent for the long term, and to better leverage their individual support.
Challenge 3 – It takes resources
Implementing a broad-based employee stock program can be daunting, and employee ownership programs certainly can’t be developed overnight. First, businesses should hire a consultant to design, set up, implement, and administer the program. Once the plan is designed, a robust system must be implemented to manage the data, allow employees to understand their ownership awards, and access any signed documents. Finally, when implementing the employee ownership plan, an accompanying communications plan should be designed that factors in consistent and ongoing education. This will keep employees engaged and educated in their company ownership.
Taking these steps requires effort, but with the right resources, these programs can be incredibly successful. New technology is helping businesses implement and administer these employee ownership programs easier than ever before.
Some key characteristics to look out for in equity management software are:
- The ability to manage the system in-house
- Accessibility so employees can view their ownership and exercise their options from wherever they are in the world
- A comprehensive, immutable ledger of every transaction, providing full transparency and control of your equity ownership
The Way Forward: Invest in Employee Satisfaction
If the Great Resignation is proving anything, it’s that the old ways of doing business aren’t holding up anymore. The pandemic has provided many people with time to reflect on their compensation, and for many, they found that their compensation did not match how hard they were working. Employee stock programs are a valuable opportunity to attract new talent, retain employees, and encourage company loyalty in the long term. It’s time for companies to refocus on employee satisfaction and share the wealth of their success with those whose hard work made it possible—for the benefit of employees and the long-term health and success of the business as a whole. An employee stock plan (or profit-sharing plan) is a tool in your reward toolbox that shouldn’t be forgotten or overlooked.
Opportunity: New technology makes the upkeep and administration of employee stock programs easier than ever before. With the right software, employees are empowered to manage their own stock and companies don’t need to outsource. This allows businesses the flexibility to create the right program for their company.