Giving Ownership to Employees – Literally

By Alexandra Levit | Posted on May 13th, 2011

Over at the Intuit Small Business blog, Gil Zeimer has some terrific how-to advice for motivating employees through ownership in the business.  According to Gil, such ownership helps to attract and retain valued employees, helps keep salaries in check, provides workers with a stronger feeling of camaraderie, generally boosts employee performance as workers focus on long-term goals, and may even qualify the company for tax benefits.  Gil’s three suggestions include:

Create an Employee Stock Ownership Plan (ESOP)

The types of businesses that take this approach are usually public companies that offer liquidity to their optionees, or companies backed by venture capital firms that are planning an initial public offering or other sale to create liquidity.

Create Value Sharing Agreements

This approach is less complicated than a stock options plan, but more complex than deferred compensation. Typically used for non-publicly traded companies, value sharing agreements can be difficult to structure because there must be a well-defined measurement of the value of a company and how to determine the participants’ share of this value as it changes over time.

Create a Deferred Compensation Plan

Also known as a Long-Term Incentive Plan (LTIP), and sometimes called “golden handcuffs,” this strategy for non-publicly traded companies rewards employees who stay with the company longer and provides them with a bonus paid out over future years.

What About Figurative Ownership?

As a leader in your organization, you may not have the authority to implement one of these options (although it’s certainly a good idea to make suggestions to the powers-that-be).  Remember that even as an individual manager, you can encourage figurative ownership by assigning employees to develop new processes, products, and services, and by having them participate in cross-functional initiatives that focus on growing the company as a whole.

Starting a formal mentorship program is also a smart strategy, for employees who are prompted to teach others naturally boost their own sense of ownership over their roles and responsibilities and their commitment and dedication to the organization.