Release Date: 
10/01/19

Each October, the spirit of employee ownership is highlighted during Employee Ownership Month, an ideal time to boost awareness for employee stock ownership plans (ESOPs) and their benefit to companies, employees and communities at large.

Leading the charge in Employee Ownership Month is The ESOP Association, which believes employee-ownership improves American competitiveness, increases productivity in the workplace, and maximizes human potential.

Support for the ESOP model is long-standing and diverse, gaining endorsement from groups left, right, and center:

"...there is evidence that they [ESOPs] provide the incentives for greater effort, more cooperation, more innovation and more sharing – all of which contribute to improvements in workplace performance and company productivity. ESOPs can also increase both firm survival and employment stability and create more harmonious workplaces." – The Third Way, 2016

How do ESOPs benefit employee-owners and their companies?

To put it very briefly, ESOPs are an attractive employee benefit, giving workers ownership interest in the company and, ultimately, serving as a qualified retirement plan. As a corporate finance strategy, employee-owned companies can enjoy a number of healthy tax benefits.

Who else can benefit from ESOPs?

Employee-owned companies and employee-owners aren't the only beneficiaries of ESOPs — their customers may notice a few perks, too:

Customer service is naturally cultivated in an ESOP environment. As such, customers may receive better service when partnering with an employee-owned business. When associates have a vested interest in the organization, the work they produce — and the success of that work — is prioritized higher than you might see elsewhere. Customers who choose to work with an employee-owned organization will likely notice elevated service at every touchpoint from reception to the C-Suite, a tangible result of working with stakeholders who are motivated by customer success.

Employee-owners are often more engaged, resulting in better familiarity with product and service offerings as well as valuable procedural and institutional knowledge. You may be less likely to encounter greenhorns when partnering with an employee-owned business, as the model tends to promote employee retention and therefore, tenure. Years of experience with the products and services in which you've invested should increase confidence in the firm's competency and buyers' overall satisfaction.

Customers and suppliers of employee-owned organizations can expect consistency in long-term relationships. The very nature of an employee-owned business lends itself to business continuity and succession planning, meaning its supplier, distributor, and customer relationships remain uninterrupted year after year. Ensuring long-term success for both the ESOP and the partners with whom they conduct business is paramount to the model.

How prevalent are ESOPs in the U.S. labor force?

While becoming employee-owned may not be suitable for every organization, ideal ESOP candidate profiles will have strong management teams and consistently produce profitable operations. Today, it's estimated ESOPs cover more than 14 million participants in the American workforce, including ONEIL, which realized 100% employee-ownership in 2015.

As seen in the Dayton Business Journal and written by Cindy Schneider.