Your boss would love for you to feel like you have a stake in the company. After all, loyal employees put in longer hours, produce better work, and stick around for more years than those whose feelings about the organization can be summed up with a resounding, “Meh.”
There’s just one problem: With job security a thing of the past, and workers changing jobs a median of every 4.2 years, per Bureau of Labor Statistics data, the average worker would be crazy to get too dedicated to their employer.
Unless, of course, that worker-owned part of the business.
It’s not as crazy as it sounds. The number of employee-owned businesses has been on the rise for the past few years. In 2013, businesses with ESOPs (employee stock ownership plans) accounted for “about 12 percent of the private sector workforce,” according to U.S. News & World Report.
“I predict significant growth in the number of ESOPs in the next five to 10 years,” due to retiring business owners opting for tax-advantaged plans, Corey Rosen, executive director of the National Center for Employee Ownership (NCEO), told the Christian Science Monitor.
Current employee-owned businesses include Vermont-based King Arthur Flour, Boston’s Harpoon Brewery, and even large employers like Lifetouch, Penmac, and Amsted Industries.
How Employee-Owned Businesses Work
An ESOP isn’t as simple as just handing over the company to the employees. Rather, employees receive an ownership interest, often over time. The National Center for Employee Ownership explains: “Companies set up a trust fund for employees and either contribute cash to buy company stock, contribute shares directly to the plan, or have the plan borrow money to buy shares. If the plan borrows money, the company makes contributions to the plan to enable it to repay the loan.”
The company’s contributions are tax-deductible, according to NCEO, and employees only pay taxes on the contributions once they receive their share of stock upon retirement or when they leave the company. At that point, they can sell their stake in the company.
In practice, setting up an ESOP can be complicated, depending on what owners were doing for their employees beforehand. For example, Entrepreneur detailed how Kim Jordan and Jeff Lebesch of New Belgium Brewing switched to an ESOP. (Breweries seem especially apt to adopt the model.) Originally, the pair had created a phantom deferred compensation plan; when they decided to switch to an ESOP, “they honored the original plan until all account-holders’ ESOP balances were larger than their phantom balances.” Later, Lebesch left the company, and Jordan and the rest of the organization bought him out — ultimately increasing the employee-owned shares.
Are Employee-Owned Companies Happier Places to Work?
Still, as a business owner, dealing with the complex financial wheeling and dealing might be worth it. Although it’s hard to quantify worker happiness, employees at ESOP companies provide plenty of anecdotes suggesting that having a stake in the business makes people feel better about going to work.
Doug Miller, a warehouse technician at New Belgium Brewing, told PBS: “[Other jobs are] a job and you’re just coming in and you’re punching the clock and you’re doing your job. Here, you just do it more because you’re working for yourself. Like, I don’t work for New Belgium. I am working for Doug Miller. I am working for people who work here. That’s the difference.”
Workers at other employee-owned businesses display a similar sense of investment and belonging.
“When it comes down to crunch time, we’re a team,” Susan Becker, a receptionist at King Arthur Flour, told the Christian Science Monitor. The Monitor notes that King Arthur Flour, which was family-owned from 1790 to 1996, has grown from five employees to 160 employees since it became employee-owned.
It only makes sense that workers would be more invested in the company if they’re, well, literally invested in it.
“It’s easy to see why,” writes Darren Dahl at Forbes. “Employee-owned companies tear down the walls that have traditionally pitted management against labor, which typically results in a very collaborative and transparent culture where everyone is pulling for the same goals.”