Unaverage Leadership

Real Ownership or Psychic Ownership: What Works?

There is a lot of interest in sharing ownership with the employees of a company.  The belief is that sharing ownership increases the performance of a company.  I say maybe.

Why?  I believe that there has to be a high level of psychic ownership that goes hand in hand with real ownership.  Even better, the psychic ownership should precede the act of real ownership.

You can call an employee an owner, but if they have no means to give input, never see their input influence the company, do not understand the finances of the company, and have no idea how the ownership value in increased - it is a dead end street.

There are many companies where the employees have strong psychic ownership.  If you were to visit one, you would swear that they were owners.  The world of business forgets far to easily that the power of the mind and emotions will dominate the "facts".  Employees have to believe and feel they are owners before real ownership can make a difference. 

This is a current debate in the employee ownership world.  To see more on the debate go to this Linkedin discussion.

What Is Your Brand?

This may well be a topic that a marketing guy like Drew McLellan would cover.  So you may be asking why a culture/ESOP guy is talking about brands?

Because today a brand is truly only as strong as the culture it represents.  In today's world, people look at brands as an experience.  With quick access to information, consumers can quickly determine brands that are not true to form. 

People will quit buying a product if they sense hypocrisy and deceit.  A company may have a great product, but consumers quickly notice how companies treat their employees or how the owners or CEOs represent the brand. Do unplanned layoffs and super sized bonuses ring any bells!

The brands that will survive this economic downturn will be those where the culture fully supports and reflects the brand.  There are a host of brand "items" that all you have to do is replace brand with culture, and you have a great list of how to enhance your company's culture. 

A strong brand breeds loyalty by consumers and employees.  It is not just a mark or saying that people follow blindly like a bunch of sheep.  A strong brand represents something that employees and consumers internalize and it becomes part of their belief system.  When people truly believe, they will endure.

Teaching Employees The Business

Now is the time to teach all of your employees the business.  They need to understand the numbers and how they relate to sales, profits, cash and share value.  With the dire economic conditions you need everyone focused on the business, not just the management team.   If your employees understand the business, then they are better prepared to face tough decisions and not be surprised by them.

There have been and there will continue to be, hundreds of thousands of employee that will be laid off completely surprised and with little or no explanation of why, other then business is bad.  How would you like to be one these lucky people?

If your employees do not understand the business, then you are ignoring the knowledge capital that exists within your employees.  I promise you that if employees understand the business, you will see a huge influx of new and innovative ways to improve your business.  If you were dying, would you rather have 100 doctors working on your diagnosis or just three or four? 

I personally lead a company where the employees were taught the business.  Once that happened, the business saw significant growth in sales, profits, and share value.  Tough decisions were still made, but the employees were not freaked out because they understood the business.  During one tough decision, people volunteered on their own to be laid off to preserve other' employees jobs and help the business!

Jack Stack the CEO of SRC Holdings in Springfield, MO has written a book that relates to teaching employees the business -  "The Great Game of Business".  Here are the facts.  If you invested $10,000 in 1983 when SRC was founded during tough economic times, it would be worth $23,400,000 today.  SRC taught employees the business from day one, and they continue to do so today - 26 years of it.

If this post seems ridiculous, if you do not believe me, then at least take the time to read Jack Stack's book.  Learn the lessons from a real life business stor

    

The Power Of Engagement

A new page has turned with the election of Barack Obama as our new president.  Old barriers have been torn down and we are all anxious to see what the future holds with his leadership.

I have discussed in many posts the value of engaging your employees.  You have to admit that Barack Obama engaged people, and that was the power to his success.  He changed the history of how states traditionally voted, he engaged the younger generation, and he rallied a voter turn out as should be expected in a democracy.  When was last time a presidential candidate drew crowds of 50,000 or more. He did.  Now do you believe me when I tout that engaging your employees will get you bottom line results?

Barack tapped into the emotions of America to drive success.  You to can tap into the emotions of your employees and then drive that success with facts, financial information, and some type of ownership.  As humans we thrive on emotion not logic.  The power of love, hate, hope, faith, and fear have changed the face of the world a million times - some to the good, some to the bad.

When someone (new employee, customer, vendor, et cetera) walks into your company, what emotion will they experience?  Is it fear, hate, loathing, envy, or maybe nothing at all OR... is it love, kindness, concern, hope, pride, and a sense of welcome.  Maybe it is time for you to change the face of your company as you look to the challenges of the future.

Frugal To A Fault

I am sure you know many people who are frugal.  They do not do much, they get buy with the least of everything - one pan, two sets of clothes, simple foods, and do not drive.

The frugal concept in business is used to conserve cash and keep prices low.  The difference between a person and a company is that a person is alone and a company is group of individuals.  The individual that practices frugal living can make his choices quickly and not impact others lives in a big way.  In a frugal company it is not that simple.

The leader of a frugal company cannot be the lone believer.  They must have the support of the organization to be frugal otherwise people become zombie employees who care about nothing.

Imagine a CEO who spends time saving printed paper to reuse the back side of the paper, or spends hours and days searching for the best deal on the smallest items, and even goes through buildings to find rusted, wasp nest infested conduit to use in wiring equipment.  In today's world a CEO must be frugal, but keep in mind how your employees view these actions.  The top paid person is spending $50, $100, or more dollars an hour on these activities - which costs the company and does not add value.  I do not dismiss the concept of setting an example, but be cautious of stupidity.

Remember that everyone watches the leader and scrutinizes their actions.  The value of being frugal with dollars can lead to the loss of business, growth, and good people.  Keep a strong balance sheet, but make sure that you are always making investment in your company by spending dollars on training, process improvements, updated equipment, and offering an employment package that attracts the best and brightest.

Flickr photo by NotAgainFarm

Do You Fire The Person or The Behavior?

Firing an employee should be one of the hardest things a manager or leader has to do in an organization.  The process and the attitude that is maintained towards this person is critical to how they cope with a termination.  It is not just simply pressing a button.

When companies state that their employees come first, I would bet that this only counts for those that are employed not the ones being terminated.  Once the mark has been placed on the employee's back, they become second rate.

Instead of firing the person we should be firing the behavior.  If you have been the person fired (which I have), there is a big difference when the focus is on behavior and not the person.  Focusing on the person is destructive, confusing, and typically based on hearsay and rumors.  Focusing on the behavior requires specific examples and data that occur over time.

If you are believer in McGregor's Theory Y, then your belief in the "good of people" supports focusing on behavior. 

The example - the person that continues to have an attendance problem.  Does this make them a bad person - absolutely not!  They are engaging, when they are there they do a good job, they are smart - they just have a problem with attendance.  The termination process gives them ample opportunity to change the behavior.  When the final conversation is conducted it is now about attendance behavior, not that they are a bad employee or person.  When they walk out the door, they are mad at themselves and not the company for what has happened.

Give this some thought and then think about changing the behavior of your company's termination process.

Flickr photo by dadadreams

Better Than The Stock Market

The stock market is jumping all around and people are wondering what they should do with their investments.  For many people these investments are their retirement funds. 

The only true control you have is to take your money out or put more in.  The performance of the stock market or stocks you have invested in are controlled by others, not you.

Would you like to have some control?  There is a way to get some control and that is through employee ownership. When you have ownership in a company you can make a difference.

As an employee owner you do have some control over your investment.  You can add value through managing your customers, implementing new ideas, improving processes, and even just plain ol' hard work. 

That is just one individual, but consider that you could have a whole team or company of owners focused on building value.  Not all employee owned companies give that much control to their employee owners, but the ones that do to add value and help control the fear that most employees feel in tough times.  Employee ownership is a proactive means to give some control back to individuals.  It is not easy, but the rewards run broad and deep when ownership is shared.

Imagine if you could have that much influence on your stock market investments - you may just sleep a little better.  Ownership can take a lot of the uncertainty out of peoples lives and that my friends adds value beyond dollars.

Flickr photo by Checco

A New Day In Employee Ownership

Many of you may be contemplating the sale of your company.  One way to transition your company is through employee ownership, specifically an ESOP (Employee Stock Ownership Plan).

This transaction has tremendous tax advantages for the seller and for the company once the transaction is completed.  Another upside to employee ownership is that it spreads the wealth of the company to everyone who has helped build the company.

If these points appeal to you, I would encourage to explore the world of employee ownership.  The following websites will link you to organizations that offer information and education about employee ownership.  I encourage to explore these links and the information they contain.

• www.esopassociation.org
• www.nceo.org
• www.kent.edu/oeoc
• www.esca.us

Flickr photo by maco

Evil or Good?

When one evaluates a company's culture, one of the key indicators of what type of culture exists is how the owner of the company views their employees.

As the owner, do you come to work and dread all of the issues you face  in dealing with your employees.  When you review your financial statements and look at the payroll line do you wonder why you are giving your money away to these people.  You are the one that took the risks, gave your time, postponed vacations, and made it all happen.  The employees are never satisfied and they are always wanting you to give more of your money to them - employees are evil!

OR...

As the owner, do you come to work and look forward to working with a group of people that are dedicated to your business.  You value them for what they give to the business, but you also value them as individuals.  Looking for ways to provide personal growth, opportunities to advance, and even helping them when they choose to take another position somewhere else.  You are grateful for what they do and how it allows you to build wealth - employees are good.

So what type of owner are you?  What would the mouse in the corner think - the one that sees and hears everything you do?  If you are a risk taker, ask your employees and see if they agree with you.

Flickr photo by PortugePunk

Business Succession Via ESOP's

All owners will one day face the dilemma of how to transition their business once they have made the choice to leave.  There are many ways to conduct a business transition, but I would strongly encourage you to evaluate the merits of creating an ESOP (Employee Stock Ownership Plan).

I just attended the National ESOP Association's Annual Conference in Washington D.C.  Once again, I came away from the conference with an even stronger belief that ESOP's are a wonderful tool for business succession. I heard former owners and the new employee owners speak of their successes and challenges.  The difference is that they are now on common ground instead of owner vs. employee.  The common ground that ESOP's provide has led companies to stronger financial success.

A study by Professor Hamid Mehran of the J.L. Kellogg Graduate School of Management, Northwestern University, showed that when evaluating comparable companies, those with ESOP's showed on average 2.7% higher profits.  ESOP's also allow more people to experience business ownership and the risk and rewards of being an owner - something that most former employees would never achieve.

The original owner most likely could sell their company at a higher value to an outside entity, but then the employees are at the mercy of the new owners.  An ESOP provides many different benefits to all involved.

• Potentially pay no tax on the original sale of the company
• Potentially pay no tax on the profits of the ESOP company
• Allows the employees who helped build the company an opportunity to share in the future success of the company
• Reduces the chances that the company will move

Do not think that an ESOP gives everyone an equal voice in the company.  The company still maintains a management structure, a board of directors, trustees, and keeps many of the same decision making processes that were in place before the ESOP.

Creating an ESOP is a process that you should research and make sure that you have good advisor's at all levels.  The following are links to web sites that contain a wide variety of free ESOP information:

National ESOP Association

National Center for Employee Ownership

Ohio Employee Ownership Center

The Beyster Institute

Please take the time to consider and research the ESOP path for business succession.  It is well worth the effort.