oa © 2005 ownership associates employee ownership training and education in the usa christopher...

OAwww.ownershipassociat

es.com© 2005 Ownership Associates

Employee Ownership Training and Education in the USA

Christopher Mackin, Ownership Associates, Cambridge, MA www.ownershipassociates.com

EOLE Conference – sponsored by EFES

Brussels, Belgium - June 16, 2005



Involvement is not inevitable.

Expectations about involvement are inevitable.



Four Steps toward the creation of an

Ownership Culture1. Set the Context2. Build Skills3. Agree on Meaning - Narrative4. Initiate Organizational Change



Four Steps toward the creation of an

Ownership Culture 1. Set the Context – Why is the seller selling to

employees?2. Build Skills - Foster the development of

“ownership skills” concerning how your employee ownership structure works and how your business works.

3. Agree on Meaning – Construct your theory of what ownership means – your ownership narrative.

4. Initiate Organizational Change - Initiate a process of organizational change – Becoming a “Company of Owners”



1.

Set the Context



Why did the Sellers choose to sell to employees?



Outside Purchaser

OurC

o

Sto

ck

Founding Shareholder

s

Smith and Others

The Transaction: Option A

What happens to

OurCo, Inc.?

OurCo Employees?

Our “OurCo Culture”?



2.

Build Skills



Four Stages of ESOP Participation

Participation

Distribution

Vesting

Allocation



Total allocation = 850 shares

If the total allocation is 850 shares,

ESOPEligible PayrollSuppose eligible payroll is $2,500,000

Total payroll = $2,500,000

Beth’s $25,000

and Beth earns $25,000

John’s $20,000

and John earns $20,000.

Beth’s 8.5 shares

Beth gets 8.5 shares

John’s 6.8 shares

and John gets 6.8 shares.

Stage 2: Allocation



3.

Agree on Meaning



ORGANIZATIONAL LIFEMembership ...or...

People Issues

ECONOMIC LIFEBusiness andMoney Issues

RIGHTS VS.RESPONSIBILITIES

RISKS VS.REWARDS



OWNERSHIP VALUES AND ORGANIZATIONAL LIFE

The Necessary Balance:(1) RIGHTS & RESPONSIBILITIES

“SOCIAL” FAIRNESS

RESPONSIBILITIESRIGHTS

Voice

Influence

RecognizingExpertise

Commitment



Innovation

Investment

“ECONOMIC” FAIRNESS

OWNERSHIP VALUES AND ECONOMIC LIFE

Fair Bonus

EconomicReturn

The Necessary Balance:(2) RISKS & REWARDS

RISKS REWARDS



OWNERSHIP PERCEPTIONS

Organizational Profiles

Type 1: Act Like an Owner / Sit Down & Be Quiet

Type 2: Treat Me Like An Owner / AND Like An Employee

Management

Office orShop Floor

Rights Responsibilities Risks Rewards

1.

2.

–

+

+

–

+

–

–

+



4.

Initiate Organizational

Change



I think that, on some issues, I should leave the decisionmaking to managers with specialized knowledge.

0%

15%

30%

45%

60%

1 2 3 4 5 6 7

D isagree N eutra l A gree

1%6% 3%

11%16%

32% 31%

unpublished data from the Ownership Culture Survey™



1. Physical Working Conditions

2. Election of Employees’ Committee

3. Speed of Production

4. Job Assignments

5. Safety Rules and Practices

6. Quality Standards and Measurement

7. Hiring

8. Promotions, Performance Evaluation

9. Equipment Layout

10. Asset Purchases

11. Employee Compensation and Benefits

12. Firing

13. Marketing and Advertising Strategies

14. Raising Capital, Relationships with Banks and Investment Groups

15. Product, Technology, and Investment Strategy

16. Lay-off Policy, Employment Levels

17. Management Compensation

18. Distribution of Profits (dividends, reinvestment, debt reduction)

19. Selection and Oversight of Senior Management

20. Constitutionalism: Setting and Moving Decision-Making Boundaries

21. Selection of Board of Directors

22. Fate of the Company: merger, sale, major location change

Standard List of Corporate Decisions



22. Fate of the Company: merger, sale,major location change

21. Selection of Board of Directors

20. Constitutionalism: Setting & MovingDecision-Making Boundaries

19. Corporate Strategy

18. Distribution of Profits (dividends,reinvestment, debt reduction, etc.)

17. Selection and Compensation ofSenior Management

16. Lay-off Policy, Employment Levels

15. Product, Technology, andInvestment Strategy

14. Raising Capital, Relationships withBanks and Investment Groups

13. Marketing & Advertising Strategy

12. Firing

11. Employee Compensation & Benefits

10. Asset Purchases

9. Equipment Layout

8. Promotions, Job Evaluations

7. Hiring

6. Quality Standards and Measurement

5. Safety Rules and Practices

4. Job Assignments

3. Speed of Production

2. Election of Employees’ Committee

1. Physical Working Conditions

CORPORATEPOLICY

Influence Chart

Types of Influence

MANAGERIALOPERATIONS



Board of Directors


21. Selection of Board of Directors20. Constitutionalism: Setting & Moving

Decision-Making Boundaries19. Selection and Oversight of Senior

Management18. Distribution of Profits (dividends,

reinvestment, debt reduction, etc.)17. Management Compensation16. Lay-off Policy, Employment Levels15. Product, Technology, and

Investment Strategy14. Raising Capital, Relationships with

Banks and Investment Groups13. Marketing & Advertising Strategy12. Firing11. Employee Compensation & Benefits10. Asset Purchases9. Equipment Layout8. Promotions, Performance

Evaluation7. Hiring6. Quality Standards and Measurement5. Safety Rules and Practices4. Job Assignments3. Speed of Production2. Election of Employees’ Committee1. Physical Working Conditions

OVERALL POLICYAND STRATEGY

Influence Allocation Chart

Types of Influence

CORPORATEManagerialOperations

DEPARTMENTLocal Policy,Planning andCoordination

Management

Shareholder Voting

DecisionMaking

Represent-ation Voting

2001 Ownership Associates, Inc. Cambridge, MA.



Board of Directors


21. Selection of Board of Directors20. Constitutionalism: Setting & Moving

Decision-Making Boundaries19. Selection and Oversight of Senior

Management18. Distribution of Profits (dividends,

reinvestment, debt reduction, etc.)17. Management Compensation16. Lay-off Policy, Employment Levels15. Product, Technology, and

Investment Strategy14. Raising Capital, Relationships with

Banks and Investment Groups13. Marketing & Advertising Strategy12. Firing11. Employee Compensation & Benefits10. Asset Purchases9. Equipment Layout8. Promotions, Performance

Evaluation7. Hiring6. Quality Standards and Measurement5. Safety Rules and Practices4. Job Assignments3. Speed of Production2. Election of Employees’ Committee1. Physical Working Conditions

OVERALL POLICYAND STRATEGY

DirectInfluence

SharedInfluence

RepresentativeInfluence

ConsultativeInfluence

Influence Allocation Chart

Types of Influence

CORPORATEManagerialOperations

DEPARTMENTLocal Policy,Planning andCoordination

Em ployee Partic ipationCommittees/Task Forces

W ork Team s

Management

Shareholder Voting

2001 Ownership Associates, Inc. Cambridge, MA.



Six Steps of Decision Making

1. Initiate Process

2. Gather Information

3. Generate Alternatives

4. Make the Decision

5. Inform Others

6. Review Decision



Questions and

Answers

oa © 2005 ownership associates employee ownership training and education in the usa christopher...

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