RSM McGladrey ESOP Blog

The Power of Goals

It has been proven over and over that putting goals in writing increases the chances of success.  It is a HUGE first step, but it is not the magic bullet to success.  There are several key drivers that many organizations fail to implement that increase the chances of reaching the goals that have been written.  Organizations that utilize and practice these drivers increase their goal realization significantly.  They are as follows:  

                 1.  Involvement in setting the goals

                      2.  Commitment to peers to achieve the goals

                      3.  Regular progress reports

                      4.  Emotional attachment to the goals

When people are involved in the creation of the goals they have a deeper understanding of the why and how of the goals.  It reduces the noise that is typical of top down goal setting and moves the organization to action much quicker. 

Commitment to goals done in front of peers can be uncomfortable, but it raises the stakes of meeting the goals.  No one likes to let down their team.

Out of sight, out of mind.  Without regular reporting and updates organziations will never achieve a rhythmic cadence for people to follow.  Repetition leads to a change in habits.

If goal setting is done in a sterile, here we go again manner, do not be surprised that the organization looks like a zombie movie.  The human nature is driven by emotion and far too many organizations forget this fundamental fact.   

Finally, if the organization's leaders do not buy into these drivers, then do not expect improved organizational performance.  Simply put - walk the talk.

Flickr photo by Cheryl Gebhart

The Blind Organization

The failure of companies to provide a vision for the organization leads to employees that feel blind.  They go through the motions with half hearted efforts that lead to apathy and poor results.  If the company does not know where it is headed, then how can any organization expect the employees to know where they are going.

In many cases this vision comes from the top leader or leadership group.  The vision statement is announced and everyone is expected to buy into the vision that has been handed to them.  It may sound good, but it typically means very little to the employees.

A better method for creating vision is getting input from all employees and providing a process that is not controlled or manipulated by the leaders of the company.  Leaders need to be involved, but giving up control of the process is key.  If the employees of the company are the true creators of the vision, then the chances of the vision actually meaning something increase dramatically. 

As humans, we want to be a part of something bigger.  Something that has meaning and adds value to our lives and those around us.  Understanding how we fit into the bigger picture of life and organizations gives meaning to what we do.

Creating a vision that has meaning is a great way to open the eyes of all employees to the true potential of the organization and how they can help make it happen.

Flickr photo by lupinehorror

 

     

Ownership Balance In An ESOP

One of the elements that employee owners in an ESOP must come to grips with is the short term vs. long term views of business. Educating employee owners on how the company balances these two views should be a priority and a regular activity.  

The company may have great products, strong market penetration and high profits today, but maintaining this status typically requires investments in new products or services. These investments can be funded by internal cash flow or outside debt. Either way, these new ventures will diminish stock value in the short term with the hope that greater value will be created long term.

The timing of these new ventures in conjunction with when employee owners decide to leave the company can create an uncomfortable situation. Specifically, in a new growth cycle, the employee owner will receive a lower stock value for their ownership balance and may feel they are getting the short end of the stick.

To avoid these situations companies need to invest the time and effort in educating the employees on how a new venture will impact stock value and how the company has to look out for the welfare of employee owners today, as well as those five, 10, 20 or more years down the road. Educating employee owners gives them the information to make a better decision on when to the leave the company if they want the highest value they can get.

This is a balancing act that every ESOP company and every employee owner should become skilled at. 

Flickr photo by Hotdog Photography

The New Year's Resolution

It has been an interesting holiday season.  There seems to be a real need for everyone to take a break, regroup, and look to a new and better year.  It is the time of year where new resolutions are made, verbalized, and even printed.  Individuals and organizations declare the resolutions, the changes needed to support them, and talk about the new person or organization that will emerge when the resolutions are completed.  Unfortunately, the vast, vast majority of resolutions die in a very short period of time.

What is needed is "resolution obsession".  The resolution needs to be an obsession for the organization, which ultimately requires individuals to have this same obsession.  If the organization is fighting for survival, then individuals are more likely to move to "resolution obsession".  If the organization is doing fine, getting individuals to this state of mind is tough.

For individuals to reach a state of "resolution obsession", they must be able to fully understand and visualize the benefit they will receive either short term or long term.  An even better way to create a resolution that will garner results, find out what people are obsessed with in your organization.  

Stated in a different and simpler way - In 2011 approach new resolutions using an "obsession resolution" mind set and success will follow. 

Flickr photo by las vegas lass

10,000 Hours

It is a common discussion by leaders in employee owned companies that employee owners do not appreciate what ownership gives them, they do not act like owners, and they will never understand employee ownership. 

In the book Outliers, Malcom Gladwell suggests that to gain perfection in an activity an individual must spend 10,000 hours practicing it. He gives examples of Bill Gates, Tiger Woods, and others, where the data supports this thinking.  Mr. Gladwell clearly articulates this is not the only factor that leads to perfection of an activity, but it is an important one.

Taking this thought, and applying it to the scenario stated earlier about employee ownership, it makes sense why leaders get frustrated.  How many employees or leaders have spent 10,000 hours practicing being an owner in a company?  Here in lies a fundamental issue that many leaders and employee owners overlook. 

Every company has it's own set of expected behaviors and attitudes that surround employee ownership.  The issue is that when, where, and how can 10,000 hours of practice occur in an organization?  The key is to start today.  Practice through training, company meetings, sharing financial information, and defining the behaviors that are expected from all employee owners.  Do not let excuses get in the way.  Start small - 10 hours, then 100, a 1000, and if and when 10,000 hours of practice occurs...Incredible success will follow!

Flickr photo by einmaleins.olympia

A Chance To Showcase Your Company

Company pride is sometimes overlooked as a tool to motivate employees and increase bottom line results.  Companies that have a "special" culture sometimes fail to tell their wonderful story and miss an opportunity to give the company a boost of energy.

There are many opportunities out there for companies to be recognized locally, regionally, and nationally.  One of the best know national awards is given by Winning Workplaces in conjunction with Inc. Magazine -The Top Small Company Workplaces award.  Here are the details for 2011: 

• Winners will be featured in the June 2011 issue of Inc. Magazine, the premier publication for entrepreneurs and business owners. In addition winners will be featured on Inc.'s and Winning Workplaces' websites and will gain additional exposure through a nationally distributed press release.

To see if your company qualifies for the award please visit: https://tsw.winningworkplaces.org/

Here is a chance to build the pride in your company.

Governance & Culture

Many companies do not recognize the role of governance in building a company's culture.  Which by the way, improves the bottom line (study after study proves this).

I recently visited the John Lewis Partnership in England.  They are an employee owned company that has 70,000 partners (employee owners in our terms) and is the largest retailer in England.  Year over year they out perform their competition.

Within John Lewis's governance structure they have  positions called the Registrar.  The purpose of these positions is to ensure that the culture of the company is not comprised in the course of conducting business.

The role of the registrar roles up directly to the Managing Director (Board Chair in our terms).  They are not hampered by the typical management system and have a direct link to the top.  Not only do they have a direct link to the top, the Registrar system has the ability to remove the Managing Director if they are not supporting the culture of John Lewis.  This is not some radical company, this is the number #1 retailer in England!

The structure of John Lewis has taken the typical leadership role and separated out the business/management role from the people/culture role.  This allows each role to have a more intense focus, and both roles are included and integral in the governance structure.  John Lewis has realized that business success and culture go hand in hand and they have put a governance structure in place that supports, enforces, and celebrates this relationship.

What is your link between governance and culture?

Flickr photo by Dawn Endico 

Culture Makes A Difference

The research shows that ESOP companies that engage their workforce through participation have better bottom line results than comparable companies that do not engage their employees.  They engage their employees in a variety of ways - employee ownership, profit sharing/bonuses, involvement in decision making, open book management, training, and much more.

Winning Workplaces in the June 2010 Inc. magazine recently acknowledged the 2010 Top Small Workplaces.  Once again, there is data that shows a company's culture does impact the bottom line:

• 100% of winners profitable in 2009
• 90% of finalists profitable in 2009
• 36% average revenue growth, 2007-09
• Ability to weather bad times with the good: average of 28 years in business
• High average employee tenure of 7 years
• Low average turnover of 8% across 18 diverse industries

To read more about the data and the winners follow this link (please note that there are several ESOP companies on the list).

Remember The Past, But Do Not Live In It

As the Memorial Holiday approaches, I began to think of those who are now gone from my life - loved ones, friends, peers, and mentors.  Memories of joy, pain, laughter, and conflict.  It is a clear reminder that on my journey in life I can choose to live in the past, or live in today with anticipation of tomorrow.

Employee owners in ESOP companies have the same types of memories about their organization, past leaders, peers, service providers and customers.  In most organizations there those employee owners who hold onto the past and are in fear or cynical about the organization as it is today, as well as it's future.  It is very likely they compare events in the organization today to those of the past with comments such as "That would have never happened in the old days" - "Work was more fun back then" - "They would have never treated us this way back then" etc, etc....  They may have been mistreated, overlooked for promotion, or victim to a variety of other unfair events, but they clearly are living in the past.

I believe that the key to the past is to learn from it, forgive the bad, and re-live the wonderful stories once in a while.  This applies to individuals and organizations.  To help individuals and organizations achieve this there must meaning in what they do today, a clear link between today's activities and a promising future, and that they have the means and tools for both to happen.  There will be many important choices that will need to be made for all of this to transpire, but the most important one is this:

Choose to close the doors of days gone by in a meaningful way, so that all of the doors for today and tomorrow are wide open.

Enjoy your memories this holiday! 

Flickr photo by christmasnotebook

A Bird In The Hand, Is Worth Two In The Bush

In too many instances ESOP companies believe that the value of an employee owner's ESOP account is a motivating incentive.  The issue with the ESOP account value is that it is viewed as the bird in the bush.  The view of the ESOP is similiar to the bird in the bush - Will I get my ESOP money (can I catch the bird)? - Will the ESOP account be there when I leave (will the bird stay in the bush or will something else get the bird)? - The ESOP is a scam (two birds in the bush, unbelievable). 

A cash incentive is the bird in the hand.  It allows the employee owner to really feel success.  One could say it teaches people how to catch the bird in the bush.  A good incentive plan is self funding and it teaches employee owners how to increase the value of their ESOP accounts.  If the incentive is being paid, chances are the value of their ESOP accounts will increase. 

Putting a bird in the hand of employee owners may well give you two birds in the bush, but if you do it right you may have a whole flock of birds in the bush!