Achieving the Performance
Potential of Shared Ownership
Vermont Employee Ownership Center
2012 Conference
Burlington, Vermont
June 8, 2012
Alex Moss
Praxis Consulting Group
Organizational Performance
Strategy
High
Performance
Culture
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Leadership
VEOC Conference | EO Performance
June 8, 2012
Agenda for Today
 Part 1: What’s Required, Why Do More?
 What company financial information do / should
you share with employee-owners? Why?
 Discussion
 Part 2: How Can You Do It Effectively?
 Getting started: outline of a sample program
 Sample Exercises & Discussion
 Turning education into action: participation
mechanisms
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What are Your Burning Issues?
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Learn what I don’t know
Magic potion
Employee wants to do what she can to help
Balancing rights and responsibilities
Culture through rapid growth
Help people believe there’s something of value to
them, not just to sellers
How to engage temporary employees to have a
stake in ESOP
Bounty for suggestions
Community building in workforce
Reengaging longer-term employees
VEOC Conference | EO Performance
June 8, 2012
Part 1: What’s Required, Why Do More?
 Legal requirements for financial disclosure
 Research on employee ownership and
company performance
 Your company goals: what do you want
“shared ownership” to do for you?
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Legal Disclosure Requirements:
The Framework
 The ESOP Trustee is the legal “shareholder”
 ESOP Participants are “beneficiaries” of a
benefit plan under ERISA
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ESOP Governance
Shareholders
ESOP
Fiduciary
Committee
Individual
Owners
ESOP Trustees
select
are
represented
by
ESOP
Participants
elect
Board of Directors
appoint and oversee
CEO / President
hire and oversee
Leadership Team
when meet
eligibility
requirements
hire and oversee
ESOP
Communications
Committee:
Promote
Ownership
Employees
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Implications
 The ESOP Trustee receives all information
that is disclosed to shareholders
 ESOP Participants have clear rights to view
certain ESOP information
 ESOP Participants have very limited rights to
view company financial information
 ESOP Participants have no operational
management rights
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Why Go Beyond the Legal Requirements?
 Bottom line: employee-owned companies
perform better
 Research supported by Employee Ownership
Foundation
 GSS: layoffs during recent recession
 Blasi & Kruse: impact of employee ownership on
company performance in privately-held firms
 National public opinion survey
 Other research: see NCEO summary
 Ownership culture: strategies to link the fact
of ownership to actual performance
improvements
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The Role of Employee Ownership:
How does it add to the mix?
 Sharing ownership by itself does not improve
company performance
 Sharing ownership combined with
participation significantly improves decision
making and bottom line performance
 Ownership Culture strategies link these two
factors
 We wouldn’t be here if
 If couldn’t work
 If worked “automatically”
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Ownership Culture
 Running your company so that employees
think, feel and act like co-owners
 Employees at all levels
 understand who decides what and why
 have access to structures, training, information and
management support for participation
 participate actively, effectively and appropriately to
continuously improve company performance
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How Do We Want Employees To Act:
Ownership Behaviors
 “I’m going to do my own job really well &
responsibly”
 “I’m going to react & respond to others in the
firm in getting their jobs done”
 “I’m going to expect others to react and
respond to my needs in doing my job well”
 “I’m going to think about the whole,
understand the bigger picture”
Courtesy of Don Hubbard, President, Niven Marketing
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Praxis’ Employee Ownership
Performance Cycle
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C
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June 8, 2012
Discussion Question 1:
Link to Your Strategic Goals
 What are your strategic business objectives?
 What impact do you expect ownership to
have in improving your company?
 How do you want employee owners to act,
based on their increasing business
knowledge?
 What information do you need employee
owners to understand? Why?
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Discussion Question 2:
Current Status
 How well do your employee owners
understand the business and the financials?
 What impact has this had on your business
so far? What are employee owners doing?
 What works best today: tell a story about…
 A specific company leader who “did it right”
 A specific employee-owner who demonstrated that
they “get it”
 Impact of employee initiatives on performance –
operating metrics, profitability, stock value
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Discussion Question 3:
Future Vision
 Imagine that it’s 2015, and you are back at
this conference sharing your achievements
over the past couple years
 What have you accomplished?
 Leadership initiatives
 Employee actions
 The Gap: what do you need to do more of in
your company to achieve this vision?
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Part 2, How:
What are the Pieces?
 Context
 Setup
 Initial planning
 Initial education: building a knowledge foundation
 Operational implementation
 “Games” and other ongoing tools
 Process improvement initiatives
 Evaluation and continuous improvement
 Future adjustments
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Context: It’s a Whole Process
 Foundation: Leadership vision for how
ownership should contribute to achieving
strategic business objectives
 Making it work: 4 categories of activities
 Training, initial and ongoing – teach the rules
 Communication – show the score
 Incentives – share the win
 Participation mechanisms – let ‘em play
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Initial Education:
Sample Goals
 To engage employees in learning about our business
 To build awareness of
 The connection between your actions, the outcomes for our
company, and your rewards
 Business and financial terms, so that you can be effective
consumers of financial information
 Pay for performance, and the stock component of this in particular
 How the ESOP works, especially in relation to other incentives and
stock plans
 Balance between social responsibility and business objectives
 To create readiness and knowledge necessary for future
implementation
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Common Approaches
 Focus on financial statements
 Start w/ dollar bill, carve up
 Profit & Loss, Balance Sheet, Cash Flow
 Case studies of where the numbers come from
and how the statements relate to each other
 Examples
 Companies
 Commercial product example: the Accounting
Game / Lemonade Stand
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Praxis Template Outline
 Initially: 3 sessions, 2½ hours each, 1x /
month
 Session 1: Our Business, and How We Make
Money
 Session 2: How You Benefit through Profit
Sharing, Ownership, Retirement Plans, Other
Incentives
 Session 3: Factors That Drive Our Stock Value,
and What You Can Do To Affect It
 Future: additional sessions and continuing
follow-up at departmental and corporate
levels
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Agenda for Session 1
 Income & expenses: the personal view
 Our business: the flow
 Our Profit & Loss statement (P&L): tracking
whether and how we make money
 “What if?” scenarios: the impact of changes
on our profits and stock value
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Exercise 1:
Personal Income & Expenses
 Income
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 Expenses
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Exercise 1:
Personal Income & Expenses
 Two rounds
 Round 1: Personal, your home budget
 Round 2: Our Company
 Questions
 Where does the money come from?
 Where does it go?
 If there’s coming in than going out: what can you
do with it, and how/when will you get it back?
 If not: what can you do about it?
 Who decides, and why?
 How does this relate to “value” and “wealth”?
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Exercise 2:
The Flow of the Business
 Your basic business process: what are the
steps?
 The exercise
 List functions & attach employee names
 Compare notes, pick 1 company
 [Make photos, big enough to handle: ~ 11x17]
 Put them in order
 Relate to the P&L
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Other Exercises in Session 1
 Product P&L: big enough to count, small
enough to understand
 Whole company P&L: sum of the parts
 “What if” scenarios: effect of operating
improvements on the bottom line, hook to
ongoing “games”
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Agenda for Session 2
 ESOP & Benefit Sharing Overview: create it,
share it
 How: Profit Sharing, Ownership, Retirement
Plans, and Other Incentives
 Rules: how they work
 Valuation: what all these plans could be
worth to you
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Agenda for Session 3
 Our business strategy
 Our value proposition: why people buy products / services
from us
 Our Strategic Plan: where we are headed
 Our stock value
 How the market / appraiser values our stock
 How you affect the value
 Where to from here
 What we want you to do: operating challenges &
opportunities
 What other information you will receive: future education &
communications
 Wrap up & graduation
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Other Sample Exercises
 Constructing the Balance Sheet
 Developing specific performance improvement
targets
 Linking performance targets to the financial
statements to individual rewards
 Reinvesting profits: Board of Directors exercise
 Profits, book value and market value
 Affect of investments, acquisitions, other growth
strategies – long term risk & reward
 Future value illustrations (for ESOP, Profit
Sharing and/or other contingent benefits) –
sample employee and/or individual tool
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VEOC Conference | EO Performance
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Keeping the Process Alive
 Core education/training program
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Targeted topics for leadership and/or “local” issues
More big picture – our business strategy, and why
More details – unit performance & improvement goals
Repeat for new employees
Adjust for new business / economic realities
 Regular communication of performance issues and results
 Participation structures so employees can use new
information and knowledge to improve performance
 Integration with other short and mid-term incentives
 Follow up:
 “Building Long-Term Value: Developing a High-Performance
Ownership Culture”
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www.praxiscg.com/published-work/building-long-term-value-developing-high-performance-ownership-culture
VEOC Conference | EO Performance
June 8, 2012
Effective implementation requires:
 Accountability: whose job is it to oversee /
insure success?
 Development: who will design it?
 Trainers: who will teach it? How will they
learn?
 Reinforcement: link to ongoing distribution of
key financial data
 Repetition: how often?
 Revision / continuous improvement:
incorporating new learning and keeping it
fresh over time
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VEOC Conference | EO Performance
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Praxis’ Principles for Effective
Business Literacy Development
 Simple
 Concrete
 Interactive
 Enjoyable
 Strategically integrated
 Developmental
 Just-in-time
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Discussion / Q&A
 Any unanswered questions?
 What makes this hard?
 Other best practices in your companies?
 What are your top recommendations – things
you would do now, if you were starting from
scratch, or things you wish you could do?
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Contact Information
Alex Moss
Praxis Consulting Group, Inc.
215.753.0304
alex@praxiscg.com
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