However, setting up a successful ESOP takes thoughtful planning. Here are five key tactics to keep in mind when setting up an employee equity grant program:

Make everyone a shareholder.

For most companies, equity is generally reserved for senior leaders and executives. If you want true equity, expand the offering to all employees. Empowering every employee – regardless of their role, location or seniority – throughout an organization is more powerful than you think. Not only does an ESOP grant program drive retention, it also helps them create personal wealth and connect more deeply with the mission and strategic priorities of a company. Give employees a stake that they can see and make decisions with – especially your team members who are hourly wage earners or early in their careers. No matter where they are in their employee journey, a true shareholder reaps the financial benefits of equity – the opportunity to build wealth, to learn about investing, and to set themselves up for future financial success. This type of empowerment changes how employees think about their day-to-day work and their relationship with the company.

Help your employees understand the full value of their equity shares.

Holding shares without understanding what they can do isn't going to mean much to an employee. Organizations must assume that at least some of their employees have little to no experience with investing or with the stock market – with an ESOP, that experience changes quickly. Give employees the gift of financial education and planning resources so they can make informed decisions based on their own financial goals. Offer free access to certified financial planners, regular seminars, one-on-one coaching, digital tools, and retirement planning. The timing of these educational offerings is also important – make them available year-round, not just around the time of vesting or the granting of new shares.

Adopt a people-first approach to any programming.

A human-first approach to any programming in the organization is essential, ensuring employees feel seen and taken care of before anything else. It's important to understand there is no required use of the shares – and it's beneficial to give all employees the flexibility and freedom to use their equity grants as they see fit, once vested. Every employee is unique and their financial decisions should be too. Regardless of an employee's life stage – whether they are paying off student loan debt, saving up to buy a house in the future, or preparing for retirement – they should be able to use the equity grant program to fit their financial needs.

Operate transparently.

Within the organization, having a shared purpose can motivate employees to keep moving in a positive direction. Continuing open dialogue around strategic company priorities, keeping employees abreast of how the business is performing, and awarding shares when financially prudent, helps employees fully understand their organization's mission, vision, values, and how each person contributes directly. This message should come from the top at a leadership level and reinforced by managers. When employees understand how their individual work ladders up to the company's financial results and key outputs, they are more focused and motivated to perform at a higher level.

Make the program turnkey, easy to understand and participate in.

Communication is key to employee engagement with an ESOP program. Commit to delivering regular updates, with details of the program and milestones to keep track of, including when their shares vest, dividend accrual, and any tax implications. Providing this information in one place – a company intranet, or an investing portal – helps keep everyone informed. Throughout your communications plan, remind employees that the shares are a reflection of and encouragement to maintain an owner's mindset.

Instant Insights /

Strengthening employee retention by fostering an owner's mindset

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