Regardless of all operational, strategic and management factors, staff productivity can make or break a business. Recruitment and training are thus fundamental to any CEO’s efforts to ensure or improve worker output. Still, many firms struggle in these areas, and many others wonder what more can be done. Employee ownership is a complement to recruitment and training, and is gaining ground as a performance incentive. Today, over a fifth of the U.S. workforce participates in some type of employee ownership or holds company stock options, but these models are far less widespread in emerging markets.
However, employee ownership’s vast potential in developing countries was highlighted recently through a company called Taai Bricks. Taai Bricks is a brick manufacturer based in Gauteng, South Africa. In a country where low worker capacity is listed among enterprises’ top challenges, Taai Bricks has improved both the quantity and quality of workers and their output through extensive training and incentives. Nearly half of Taai Bricks’s 173 staff are women and, at entry, almost 70 percent of them would be considered low-skilled, with few having found ways to achieve professional advancement. In addition to providing vocational and technical training, Taai Bricks endows workers with shares in the company, which increase in number with seniority and performance. This unique incentive model has helped create a vibrant workforce with remarkably low staff turnover and consistent gains in output, quality of work life, participation in the workplace, labor management relations, and revenue.
Taai Bricks illustrates employee ownership’s ability to improve business competitiveness. Some studies suggest that employee ownership and similar plans improve company performance by reducing principal-agent conflict—in other words, the worker will do what is best for the company when she or he also gains directly from the upside. The long-term appreciation of the employee’s stock theoretically cements longer-term allegiance and loyalty.
The gains that come with employee ownership and profit sharing go deeper than what is simply driven by financial incentives. After all, there’s a human side to human capital. Engaging employees more deeply in business operations also drives stronger performance. For example, at Taai Bricks workers are encouraged to contribute their views and be involved in decision-making, making them feel more integrated and loyal. Likewise, they are able to assume increasing responsibility and chart their own progression. In some ways, Taai Bricks’s model resembles Google’s employee engagement approach, which provides high autonomy and growth opportunities as opposed to large equity stakes. Engagement goes beyond financial motivations, and refers to experiential factors. Taai Bricks’s workers, for instance, get along with management in ways that are not often seen in South African companies. It is impressive and inspiring to see the workers’ interactions with management, the workplace environment and the opportunities for learning and growth.
Based on Taai Bricks and my broader studies of Employee Stock Ownership Plans (ESOPs), it seems that many employees could benefit if companies in both emerging and developed markets further explored employee ownership models. For emerging market small businesses, ESOPs could be particularly useful in terms of financing debt, taking advantage of tax benefits and quickly building up shareholder equity, in addition to the workforce benefits already described. Surely employee ownership deserves a closer look.
Go to the Aspen Institute’s curriculum library on Employee Ownership and download this syllabus: Act Now