Strengthening employee retention by fostering an owner’s mindset

Retaining great employees is an ongoing challenge for business leaders – one that has only grown more difficult in today’s uncertain economic climate and competitive job market. Recent data from Workhuman shows that more than a third (36%) of U.S. employees plan on leaving their jobs within the next year. Today, employees have more options to choose from, increasing their likelihood of leaving their current positions in search of better opportunities. What’s more, the emotional and mental strains of the pandemic have caused employees to question the purpose of work and their role within an organization. “Is the time and effort I’m putting into my job worth it? Does my company appreciate me? Do I share in its mission and purpose?”

In an ever-evolving environment, how can companies better retain top talent and maintain a strong and stable workforce so they can continue to grow and succeed in the long term? With proper thought and planning, one powerful, proven solution is employee ownership.

Cultivating an owner’s mindset

Having an owner’s mindset means that employees feel they are responsible and have a personal stake in the success of the company and are a part of something bigger than themselves. The concept, developed and popularized by Chris Zook and James Allen at Bain & Company in their 2016 book The Founder’s Mentality, is a roadmap for organizations that want their employees to own their work and become more invested in both personal growth and business success.

One of the most effective ways to breed an owner’s mindset is making your employees actual owners by granting them equity in the company with an employee stock ownership plan (ESOP). An ESOP is an employee benefits offering that grants employees ownership interest in the company in the form of shares of stock. This differs from a more common employee stock purchase plan (ESPP) as employees must use their own money to buy stock, rather than getting it granted from their employer.

Offering equity in the company levels the playing field, helps employees feel valued in their organization, and cultivates a sense of empowerment, inclusivity, belonging and loyalty. Giving all employees the same financial opportunity to be investors in the company and making sure they are equipped with the information needed to be successful in their personal and professional lives often increases the quality of work they put into the organization.

The how and why of employee stock ownership plans (ESOPs)

The impact of employee ownership programs is well documented. A 2022 report conducted by the National Center for Employee Ownership (NECO) with support from the W.K. Kellogg Foundation compared workers early in their careers, with employee ownership, to their peers without ownership, and found that being in an ESOP was associated with 92% higher median household net wealth as well as 53% longer median job tenure.

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:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

Laying the groundwork for long term success

Creating a benefits program that grants economic freedom gives employees the opportunity to set and achieve personal goals that will positively impact them, their families and the community where they live, and consequently their work within the organization. By providing tools for success along with the equity grant so employees can make the most of their benefits demonstrates the company cares about the whole person – and this is a crucial factor in establishing long-term company loyalty.

Read more: Employees with equity in the company are less likely to leave, new research finds

As HR executives look to make adjustments within their organizations to increase retention, an equitable, inclusive equity grant program centered around a people-first mentality is a powerful step making employees feel valued and an integral part of the business’ success.

Kathie Patterson is the Chief Human Resources Officer at Ally Financial.