| The Future of ESOP Communications: A Prediction
Accurate predictions of the future are generally based upon knowledge of the present and the past. This article is an attempt to build a case for more comprehensive and more detailed ESOP employee communications, at more ESOP companies than ever, between the end of this year 2003 and the beginning of the year 2023.
First let us look at the past 20 years of ESOP communications. For some companies (Category A), the installation of their ESOPs was merely a prelude to the real issue, which was creating a culture where employees could begin to think like owners. For others (Category B), the issue was simply to help employees understand that they had a new benefits program, period. For the rest (Category C), the ESOP had been put into place as a financial tool and was not important for any other reason; hence, these companies complied with the law in terms of employee communications, but nothing more. The breakdown for these categories has not been tracked scientifically, but a best guess would place them thus: Category A, 20%; Category B, 50%; and Category C, 30%.
The number of companies who participate in employee communications beyond the legal requirements has increased slowly but steadily over the years. The evidence for this statement can be seen in the continued growth in attendance at the communications sessions at the National Center for Employee Ownership’s Annual Conferences. Another reason for this belief is The ESOP Association’s AACE (Annual Award for Communications Excellence) competition, which recognizes excellence in employee communications programs—the competition has almost doubled in the past five years. Finally, there has been a steadily increasing interest in ESOP employee communications from companies who are not members of either of these organizations, but who recognize the value of explaining to employees exactly what their ESOP benefit is.
So why should there be any greater growth in ESOP communications as we progress into the future?
The answer lies in some of the latest books on management techniques. In Unnatural Leadership: Going Against Intuition and Experience to Develop Ten New Leadership Instincts (Jossey-Bass, 2002), David Dotlich and Peter Cairo investigate new management techniques for a rapidly changing business environment. Their observations, based on their own work with leaders from all industries, show that leaders in an unstructured and unpredictable world full of random, sometimes frightful events, must exhibit highly adaptable leadership qualities. There is too much information for one person to absorb; decisions must be made very quickly to be effective; and there are many situations in which there are more than one right answer. The “unnatural behaviors” range from relying less on one’s experience to exposing one’s vulnerability and trusting others before they earn it (there are ten “unnatural” behaviors in all). One can see that the ability to succeed with “unnatural leadership behaviors” depends very much on the leader’s working relationship with his/her colleagues and other employees in the company. Education and training, trust, and the sharing of information are key to these new behaviors. The good news is that many of these behaviors are “natural” to leaders of employee- owned companies where ownership cultures thrive. As more and more managers adapt to a highly volatile environment, it will become “natural” to share more and more information with employee owners and to tap their creativity and expertise in the search for stability and growth. For ESOP companies, it will become “natural” to share ESOP information through these channels.
Sally Helgesen, who has studied and written extensively on our new volatile environment, says that the new leader “operates across ranks and divisions, recognizes no taboos beyond civil discourse, deals with, not around, the issues, consults with whoever matters, encourages innovation in the ranks, respects the power of buy-in, and honors non-positional power” (Seminar: “Employee Ownership in a VUCA World,” Chicago, 2002). Are these not also the outstanding characteristics of management in ESOP companies where there are strong employee ownership cultures? In The Web of Inclusion: A New Architecture for Building Great Organizations (Doubleday, 1995), Ms. Helgesen elaborates on characteristics of these “web” organizations. They “de-emphasize job descriptions, acknowledge non-positional power, encourage front-line decision-making, and have a strong sense of history, purpose, mission and tradition.” Their leaders say that “trust makes it possible.” These are familiar concepts to those of us who work with employee ownership cultures.
More and more, new management books are advocating training and education, not just about the employee’s job but about the company as well. The ability to build relationships and the value of listening are important components of the new leadership image (Marcus Buckingham and Curt Coffman, First, Break All the Rules: What the World’s Greatest Managers Do Differently, Simon & Schuster, 1999). In the 3rd edition of Leadership Challenge (Jossey-Bass, 2002) James Kouzes and Barry Posner quote Alan Keith of Lucas Digital as saying that leadership is “creating a way for people to contribute.” Kouzes and Posner go on to say “you can never stop communicating nor do enough communicating…,” and they identify leadership in the new context as having to deal with “heightened uncertainty, with putting people first, staying connected, using social capital, making decisions speedily, dealing with a changing workforce and infusing their human capital with an intense search for meaning.”
In numerous other new titles, you will find at least a section on getting the best ideas from your own work force, on creating trust through education, on teamwork and shared visions. These ideas are a far cry from the “Lone Ranger” style of leadership that has been much touted in the past. As more companies embrace leaders who subscribe to the new school, more companies will inevitably come to share visions and management with all of their employees. If that company becomes an ESOP company, ESOP employee communications will inevitably play a large role in the creation of company teamwork. Similarly, as existing ESOP companies gradually adapt their organizations to a changing environment, the wisdom of communicating the ESOP and tapping the resources of all company employees will become more and more evident.
For this reason, given the nature of successful leadership in a world where change is the norm, I predict that the future for ESOP employee communications is very bright indeed. As the new models for leadership become dominant, ESOP companies will “naturally” broaden their communications channels in an effort to foster “natural” ownership behavior. In fact, I predict that Categories A, B, and C will look like this by the year 2023: Category A, 40%; Category B, 40%; and Category C, 20%.
Three Stages Of ESOP Employee Communications: It's Your Choice
|The object of the Ownership Advantage column has always been to demonstrate
why increased employee communications in ESOP companies can lead
to enhanced pride and improved productivity on the part of employee
owners. Month after month, we highlight companies whose thriving
communications programs are at least partly responsible for the company's
success in the marketplace. Why is it, then, that many ESOP companies
never even consider implementing an employee communications program?
One reason may be that they equate employee communications with sharing
their financials, which is something they do not want to do; or perhaps
they have no intention of allocating the resources necessary to put
such a total program into practice. To them, it appears that a company
has to commit to a total participative program or do nothing at all.
In fact, ESOP companies use any number of variants on the "typical" ESOP
communications program. The following graph illustrates the range
of programs that companies use to communicate their respective ESOPs.
At the far left (1-3, "Stage I") are programs that only
provide what the law requires; towards the middle (4-7, "Stage
II") are programs designed to publicize and promote the ESOP
within the company; and to the right (8-10, "Stage III")
are programs that add open book management and business literacy
to the legal and promotional aspects of a total communications program
speaking, on the journey from left to right each step would follow
the next in a building block scheme. For example, legal requirements
should be met first, but can then be enhanced by further ESOP education
and training. If the company already knows it wants to be in Stage
III on the scale, they can shape the progression of their program
towards that end. Most companies, however, do not plan that far ahead.
logical progression of the journey may also be thought of as a mountain
trek. Everyone starts up the mountain, but not everyone reaches the
In my experience there are two places on the trek where companies
are likely to stop their efforts. The first occurs between "Participant
Statements" (Stage I) and "ESOP Events" (Stage
II). Virtually all ESOP companies provide annual statements to
individual participants that include the participant's account
balance, vesting, and account activity. They may use meetings
or social events at which to hand out statements, but this concludes
their obligations to participants with regard to the ESOP. The
ESOP is truly, then, "just another retirement plan."
The jump to State II requires two things: recognition that the
ESOP is not "just another retirement plan," and the commitment
to show employees why it is not. This is the stage reached by many
of the companies who enter The ESOP Association's Annual Awards for
Communications Excellence (AACE) each year. At this stage, the company
looks for ways to disseminate information about the ESOP to its employee
owners. Exactly what works best depends in large part upon the organization
of the company, e.g. companies with multiple sites face different
challenges from those with only one location. An ESOP Advisory Committee
made up of members from all areas of the company is a good place
to start. The Committee can be in charge of ESOP events and ESOP
education, using meetings, electronic & paper media, promotional
items, etc. Most of these companies use "employee owned" in
their logos, and view their ESOP status as a competitive advantage
in their industries. Employee owners become aware that their company
is different because of the ESOP, and they also have a lot of fun
in the process.
So why don't all companies progress to Stage II? The answer most
likely lies in management's disinclination to give a committee (or
whoever would be responsible for the program) the time and resources
to implement an ongoing program. Those companies who are in Stage
II believe that the resources are well spent, but the investment
can be a hard sell to companies who have never tried it. If your
management needs convincing, a good way to start would be to view
the AACE entries, which are displayed at TEA's National Conference
in May and again at its Communications Conference in July. These
award-winning companies and others, are always willing to share their
experiences and answer questions about what did, and did not, work
The second major obstacle on the road to linking ESOP ownership to
company performance occurs between "ESOP Explanations" (Stage
II) and "Open Books"(Stage III). The very thought of sharing
financial information with rank and file workers creates nightmares
for some executives, and not without reason. This is a critical juncture
in the formation of an ownership culture, and should be pursued with
care. The ability of employee owners to understand company financials
rests directly upon their ability to understand the numbers. If this
stage is not accompanied by the appropriate planning and education,
it can indeed be a nightmare, sending mixed signals and misinformation
throughout the company.
On the other hand, companies in Stage III who provide business literacy
training and share financial information have found that this is
the crucial step in preparing employees to think like owners. Once
employee owners understand the financial pieces that make up the
company, they can begin to see how their own departments and individual
jobs affect the company's performance and, hence, the value of their
The main obstacles to entering Stage III have to do with management's
fear of unleashing unknown demons, as well as with their lack of
knowledge regarding the benefits of sharing company financials. Many
companies have proved that opening the books to employees -- with
the correct training, processes and procedures -- has been the crucial
step in moving to a successful ownership culture. These companies
are always happy to share their experiences with others who are thinking
of making the journey to the top.
NOTE: The AACE competition is
seeing more Stage III companies enter AACE each year, a fact that
would support the theory that more companies are finding Stage III
to be the key to increasing productivity through the creation of
an ownership culture.
Wherever your company is in the process, always remember the importance
of planning, that is, choosing where you want to be on the scale.
You can always take the journey further if you wish. No company in
Stage III will tell you that the journey was easy, but I believe
they will all tell you it was worth it. They will also tell you that,
since the journey never really ends, it's a good thing that getting
there is so much fun.
Stage I, Stage II, Stage III -- it's YOUR
2002-Communications Excellence In Action!
Ever wondered how your ESOP Communications Program compares with
others around the country? To find out, all you need to do is enter
the AACE competition sponsored by The ESOP Association. The acronym "AACE" stands
for Annual Awards for Communications Excellence, a program set
up to recognize outstanding efforts in the field of ESOP employee
Through the years, more and more companies have been entering
the AACE competition; in 2002 there were 42 entries comprising
over 300 pounds of material. Not only was there more material,
but the "bar was raised several notches," that is,
the quality of the entries was higher than ever before. The number
and originality of the programs competing for prizes sent a message,
loud and clear, that ESOP companies have found that it is well
worth the time and energy to let their employees know what the
ESOP is and how it can affect their daily lives.
A good example of the results of a successful communications
program was depicted in the first-place winner of the Audio-Visual
Category. MTC, Inc., of Temple, TX, created their award-winning
video by filming their employee owners at work. Each person was
asked to say a few words about his/her division, specific job,
employee ownership, and the like. The first responses were those
used in the video, and their combined message is "This is
a great place to work; I feel like I'm working for myself; MTC
cares about us; WE ARE HAVING A GOOD TIME!" Clever
editing and timing finished off the video in fine style to provide
MTC with a tool that is at once motivational and realistic.
Another example is HDOS Enterprises, otherwise known as Hot Dog
On A Stick, from Carlsbad, CA, winner in the Printed Materials
category for companies with over 250 employees. HDOS runs summer
hot-dog and drink stands on the West Coast. The median age of their
employees must be under 20! They are 100% employee-owned, and have
figured out how to make the energy of youth work for them in the
communication of their ESOP. All their materials (including their
runner-up video) are pointed directly at their youthful workforce;
explanations and images are simple, bright and colorful. The company
is effectively getting the word across to their employees, even
those who are not yet eligible for the ESOP. Younger employees
look forward to the time when they, too, will be participants!
And then we have MPD, Inc., from Owensboro, KY, whose seven-year-old
ESOP has broken the AACE record for number of wins--four AACE's
in seven years. This success of this company in the AACE competition
rests on three things: 1) their commitment to employee communications
(they began their program even before the ESOP was implemented),
2) the outstanding creativity shown in each component of their
program, and 3) their ability to organize and present this mass
of information to the AACE judges. Janice Tomblinson of MPD will
show participants at The ESOP Association's fifth Communications
Conference how MPD has created both its programs and its AACE entries.
All of the 2002 AACE entries will be on display at the Communications
Conference July 25-26, OakBrook, IL. Go to www.esopassociation.org for
information on registering for the Conference. This is THE conference
to attend for ESOP communications, whether you are just beginning
your program or need to gather a few fresh ideas for a mature program.
The Mid Atlantic Chapter had four entries this year: previous
winners Aspen Systems, Social & Scientific Systems, and KCI
Technologies, as well as new ESOP company Southland Concrete. Southland
received a special Honorable Mention in the "Young ESOP" category
for their extensive use of Spanish to help communicate their ESOP
to their largely Spanish-speaking employee owners. AACE looks forward
to more entries from Mid Atlantic next year (you will recall that
MAC had several winners in 2001).
A complete list of the 2002 AACE winners can be found on The
ESOP Association's web site, www.esopassociation.org.