Vermont Employee Ownership Center
2012 ConferenceBurlington, Vermont
June 8, 2012
Alex MossPraxis Consulting Group
Achieving the Performance Potential of Shared Ownership
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Organizational Performance
Strategy
LeadershipCulture
HighPerformance
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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?
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
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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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Individual Owners
ESOP Governance
ESOP Trustees
select
Leadership Team
Board of Directors
appoint and oversee
elect
hire and oversee
Shareholders
Employees
CEO / President
hire and oversee
ESOPCommunications
Committee:Promote
Ownership
ESOPParticipants
when meeteligibility
requirements
arerepresented
by
ESOPFiduciary
Committee
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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 OwnershipPerformance CycleTM
YourActions
CompanyPerformance
YourRewards
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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 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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Keeping the Process Alive
Core education/training program 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”
www.praxiscg.com/published-work/building-long-term-value-developing-high-performance-ownership-culture
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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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Praxis’ Principles for EffectiveBusiness 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
June 8, 2012
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