Employee ownership may be the best way for your business to survive – and thrive

    Sharing ownership with your employees may seem daunting, but it may also be the best way for your business to survive — and even thrive.

    Getting Owned and Loving It - Douglas Oct/Nov 2022
    Rob Germain, general manager and Chief Employee Owner at CHEK Media Group, says that, with its new model, at times the TV station has the energy of a tech startup, even though it’s been operating since 1956. Photo By: Jeffrey Bosdet.

    Some of the biggest challenges in organizations today include employee retention, accountability and succession. The idea of employee ownership can improve all of those areas. 

    Ownership is rewarding because it is deeply human, and it is inseparable from autonomy. Together, they are pre-conditions for accountability. 

    Employee ownership can come in many forms, from the simple act of putting up pictures in an office to material benefits ranging from sales commissions and profit sharing to employee stock ownership plans (ESOP) and equity partnerships. 

    Yet many employers still struggle to connect those dots. For some it may be a reluctance to share the wealth. For others, it may be a perception of a loss of control. But what we give up in individual control, we more than regain in collective success.

    Accelerate accountability

    A common complaint of owners and managers is that employees and, in particular, millennials aren’t accountable. Their complaints range from a wish for greater understanding — “What am I missing?” — to exasperated outbursts of “All I ever do is babysit!”

    At the root of this frustration? Employers expect accountability without ownership. That can’t work. Whether it is at the functional levels (payroll, paint detailing, product design) or at the leadership level of a whole division, we can only be accountable for what we “own.” 

    Gordon Duval, vice-president of sales and marketing at VMAC, the Nanaimo air compressor manufacturer, speaks to a pattern: an integration of lean values with the idea of ownership.

    “VMAC is a lean organization, which means we hold respect for people and continuous improvement as core values,” says Duval. “Continuous improvement falls directly to the individual(s) conducting the work; they are the experts most capable of solving the problems or improving processes. This level of continuous improvement requires complete ownership of the problem.” 

    Rebecca Kirstein Resch, founder and CEO of inqli, a software startup in Victoria, agrees. “Although we are only three years into our startup, we definitely see our people taking ownership of their roles, their outcomes and, ultimately, the company and culture of trust and autonomy that we’re all building together,” she says.

    A strong sense of autonomy and ownership is also required for employees to take innovative risks. 

    Rob Germain, general manager and CEO (Chief Employee-Owner) at CHEK Media Group, pinpoints the connection. “Although CHEK has been operating since 1956, at times it feels more like a tech startup, with employees encouraged to innovate in developing its multimedia business,” he says. “Not having to answer to a corporate head office allows our employee-owners to be nimble and less risk-averse.”

    Add money to the mix

    Organizations can drive a lot of change through the idea of ownership without taking the step into “actual” or equity ownership. But the research is clear: a financial stake matters. In supporting accountability and autonomy, an ownership culture is powerful. A culture of owners is even more so. 

    Sixteen years ago, Kinetic Construction launched an ESOP as a succession strategy, anticipating founder Bill Gyles’s retirement. Now, says Fallon Lindsay, Kinetic’s director of finance and administration, “We have buy-in from employees representing a mix of every position. This drives accountability both ways because our leaders know people are investing in them. As we often say as a board of directors: We pour our coffee from the same pot that an investor has just poured from.”

    Similarly, says Duval, “VMAC creates ownership and ‘skin in the game’ amongst its coworkers through employee ownership — with many coworkers being shareholders — profit-sharing and a bonus program specifically oriented towards the development of leadership qualities.”

    ESOPs are increasingly common in the United States, but less so in Canada. Setting up an ESOP in either country is complex, requiring good legal and accounting support. Employee ownership trusts (EOTs) are not yet available in Canada. The good news is that the 2022 federal budget acknowledged the need for more options for employee ownership and promised to amend the Income Tax Act by introducing EOTs. 

    Retention and succession

    We are in the middle of an unprecedented situation in Canada. Profound demographic shifts and employees retiring or rethinking their career journeys have created a perfect storm of disruption in every sector, from restaurants to shipping ports to airlines. 

    This has left leaders scrambling to stem a tide of departures and replace those who do leave. Succession due to retirements is particularly challenging because those leaving often take with them decades of experience and relationships that are often essential for long-term growth and success. 

    Delegation is a serious challenge when we don’t have the people to delegate to. The work concentrates on fewer and fewer people, creating a negative spiral of burnout.

    The idea of ownership is an answer to these challenges as well.

    At CHEK, for instance, Germain credits the employee-ownership model for attracting and retaining staff. “With 80 employees, CHEK has more than doubled its staffing since it became independent and employee-owned in 2009,” he says.

    Ownership is also critical for advancement and succession. We need highly skilled, talented and experienced people to move into positions of increasing accountability. The idea of ownership invests people in the journey and clarifies the pathways. Ownership reduces ambiguity. 

    Foundational elements

    To nurture a culture of ownership, at least four foundational elements are required: leadership values, a sophisticated understanding of organizational dynamics, operational transparency and a data-rich environment.

    Without an “all-in” commitment from senior leaders, ownership initiatives will fail. The idea of ownership is rooted in values of equity, consistency and transparency.

    “We put a lot of effort into designing an employee stock option plan that reflects equity that we believe is critical for shared prosperity,” says inqli’s Kirstein Resch. “We believe that this will attract the kind of people who share our desire to build more equitable and inclusive workplaces and economies.”

    Shifting to a culture of ownership takes significant time and resources, but it is worth the effort.

    “Attraction and retention are still big motivators,” says Lindsay. “But for Kinetic’s leadership, it is a values-based decision first. We believe in a meaningful transfer of wealth to employees through equity.” 

    The knowledge requirement

    In his book, The Great Game of Business, Jack Stack makes the important point that we cannot advance any idea of ownership without learning and development. “We’ve created economic value [for employees],” he writes. “But more importantly, we teach people how to make a difference.”

    Ownership, at any level, requires an understanding of the rules of the game, operationally and financially. When organizations say they have tried “the idea of ownership” and it hasn’t worked out, it is almost always a failure of knowledge. 

    Developing task or role ownership requires task-specific training and an illumination of the bigger picture. It requires understanding how each employee’s decisions and efforts contribute to everyone’s success.

    “Continuous improvement helps ensure that all coworkers develop the skills to become expert problem solvers, learning the tools and processes that allow them ownership of the problem and the autonomous decision-making to solve it,” says VMAC’s Duval. “[Ownership] also creates the opportunity for future leaders to be identified for succession planning.”

    Getting Owned and Loving It - Douglas Oct/Nov 2022
    VMAC, the Nanaimo-based air-compressor manufacturer, has integrated lean values with the idea of ownership. Their core values include “respect for people and continuous improvement.”

    Many business owners don’t understand balance sheets or concepts like opportunity costs, so getting this information to frontline employees/owners can be heavy lifting. But successful ownership cannot be separated from this knowledge.

    “All of our people are involved in understanding the business and financial context of all parts of the operating system,” says Kirstein Resch. “We engage people in understanding our unique employee stock option plan and how it will benefit them as we achieve outcomes that we design together.”

    Again, this goes beyond the “transactional” pieces. Employees who understand how their actions or decisions affect the big picture are most likely to make decisions that serve the whole organization. Kirstein Resch describes this approach as “the advice process.” 

    “There is someone — the decider — who needs to make a decision on how to move the organization forward,” she says. “They talk to people with experience making this type of decision, people from different parts and levels of the organization, and the people who will be impacted by the decision. They can consult with people outside of the organization to gain perspective. Then they decide and record their decision. No ‘permission’ or bureaucracy required.”

    Education, training and mentorship are mission-critical in connecting people with accountability and autonomy to truly “own” their work.

    Operational transparency

    Successful ownership begins with transparency. Having clear, transparent performance expectations and transparency in how decisions are made and how they impact the whole organization are critical components.

    At CHEK, employees have a significant say in how the business is run. “CHEK employees control four of the seven seats on the board of directors,” says Germain. “One of those seats is held by the union president. CHEK employees also help set company policies and resolve issues through a joint union management committee.”

    For operational transparency to evolve, quality information is also needed. It is challenging to be accountable when we lack the feedback of good data. Effective ownership is informed ownership.

    Digital information technologies are a boon to elevating autonomy and functional ownership. ERP systems, digital dashboards, CRM software and digital collaboration platforms (such as Slack or Microsoft Teams) allow us to pull the data we need to validate our decisions.

    At Kinetic Construction, there is an organizational commitment to data-informed management through the Last Planner System (LPS): “This is evidence of our commitment to autonomy and ownership at the operational level. Our commitment to the ESOP and to LPS come from the same core values,” says Lindsay.

    Getting Owned and Loving It - Douglas Oct/Nov 2022
    Sixteen years ago, Kinetic Construction offered an employee stock ownership plan. The result has been an increase in both accountability and autonomy, encouraging employees to take risks.

    Sailing through with certainty

    We have been navigating through some extremely difficult waters — and the signs on the horizon are that we are in for more. Economic, social and political events continue to disrupt our world like a string of storm cells. 

    The idea of ownership, while requiring a significant investment of trust and resources, can be a powerful ally in the journey. When we own something, there is greater certainty, a deeper connection and a greater confidence in making faster decisions in uncertain environments. 

    The human truth is that when we all have a share in the outcome, when we own a piece of the boat and feel trusted to do the right thing, we act collectively, with greater confidence and accountability, increasing our chances to survive and thrive.