Here are three magic words to avoid quiet abandonment: participation in employee ownership. Russ Williams, managing director of Archer Malmo, explains.
ESOPs are good for both employer and employee, says Williams / Credit: Adobe Stock
Quitting quietly, the big resignation and impending economic uncertainty are the top concerns of employers today.
As a result, ad agencies have invested in several “perks” that keep employees engaged, productive and enthusiastic, from hybrid work arrangements to expanded PTOs and family-friendly schedules. But why not take a cue from Oprah, who handed out cars to her audience with the memorable “You get a car!” You get a car! Instead of keys for a new ride, consider handing over the keys to the company. In other words, make your employees the owners of the company: “You are the owner! You are the owner! You are the owner!
It’s not a gimmick, but a solid financial and human resources strategy that has proven successful in many companies and is called an Employee Stock Ownership Plan, or ESOP. ESOPs transfer ownership to employees through a retirement plan, where they earn shares of the company. At a time when companies – in our industry and others – are looking for ways to hedge against economic uncertainty and invest in their talent for future growth, ESOPs can be that rare solution that does both. Here are five ways this ownership structure benefits employees and their businesses.
1. ESOPs improve the bottom line
To encourage employee ownership, the government exempts ESOPs from federal income tax. This means that employee shareholders see their shares paid out faster – and the value of said shares accumulates faster. It also saves the business money and provides increased long-term financial stability by eliminating recurring expenses.
2. ESOPs drive employee engagement
What better way to align your company values with your employees than to invite them to own a piece of the pie? Employee owners are literally invested in the fate of the entire organization, as the long-term health of the whole aligns quite well with their own individual interests. Employees at ESOP companies stay around 53% longer in their jobs, which has been strongly correlated with employee happiness, and earn a third more in median salary than non-owner employees.
3. ESOPs weather economic downturns
During the 2008 economic crisis, ESOPs added employees and increased revenue, avoiding the waves of consolidations and mergers that can proliferate during economic downturns. As the United States once again faces a possible recession, the advertising industry is vulnerable to shrinking marketing budgets. ESOPs have more flexibility when it comes to preserving liquidity and weathering financial storms. Employee owners may not be so quick to jump on the private equity bandwagon or choose a short-term cash injection over the long-term financial health of the organization.
4. ESOPs Reduce Income Inequality
With employee ownership, there are fewer incentives for a small ownership or management group to benefit. Wealth is distributed more evenly and the benefits of business success accrue more widely. Employee-owners have a median household wealth that is 92% higher and salary incomes that are 33% higher than those who are not employee-owners.
5. ESOPs Improve Workplace Cultures
Over the past few years, we’ve seen a significant reassessment of what it takes to create and sustain a strong company culture and provide valuable benefits to foster that culture. Studies show that ESOP workers are more likely to seek out and take advantage of the benefits, including 23% who have access to childcare through work, compared to just 5% of employees who don’t own stock in their company. . This goes for similar benefits, including pension plans, tuition reimbursement and parental leave.
Russ Williams is Managing Director of Archer Malmo, an independent agency with roots in Memphis and Austin.