The Shadow Chancellor (John McDonnell) has announced, if Labour wins the next General Election, any business employing more than 250 people must put in place mandatory share plans. This notion might not be the nail in the coffin of the opportunity for Labour to get business onside – especially after Boris Johnson’s recent retort to “F Business” – that it first appears to be.
The oft-cited example in this debate is the retailer John Lewis which not only has a popular employee share scheme, it has – until very recently – bucked the declining profits trend currently thinning out the high street.
There is a great deal of evidence to suggest employee share schemes can deliver significant advantages to business. Not least in overcoming the “them and us” mentality that persists in some working environments; they firmly place management and staff on the same trajectory.
However, there are other ways to achieve this. Yes, single-minded purpose is important in a successful business – but it doesn’t depend on an employee share scheme to make it work. Inspirational leadership, good management and the clear communication of an engaging vision and purpose can all deliver similar results.
Of course, McDonnell’s proposals are ideological and less to do with kickstarting business or solving the productivity problem than a drive for an “irreversible shift in wealth and power”.
However, increasingly, businesses are themselves looking at new ways to drive engagement, promote a sense of purpose and, ultimately, drive profits.
According to the Employee Ownership Association, productivity in employee ownership companies has risen year-on-year: from 1.5 percent growth in 2016 to 6.2 percent growth in 2017. This compares to 3.4 percent for the rest of the UK.
We worked on a campaign with Unilever to help this global brand promote its own employee share plan, SHARES. Prior to SHARES, Unilever equity plans were offered to around 3,000 executives – just two percent of the company’s total employees. The new scheme was promoted to more than 60,000 employees in 104 countries over a twelve-month period. As a result, 128,000 employees have the chance to become shareholders and share in Unilever’s future.
The success of the campaign led to awards from the Global Equity Organisation (GEO) for “Best Plan Communication” and “Best Use of a Share Plan in an Emerging Market”.
But what drove this global brand to extend its existing share scheme? It wanted to give employees an opportunity to share in the company’s success and to facilitate the awarding of shares as part of a new rewards and incentive programme. Ultimately, it was about driving engagement and, through that, performance.
Performance and engagement improvements are two key reasons why the employee share scheme model has much to offer in a retail context – where so much of the company’s success depends on the attitudes and performance of its people.
We’ve already touched on the John Lewis Partnership model, where employees share in the profits and together have a democratic say in how the business is run. Each member of the 83,000-strong workforce across the 50 John Lewis and 348 Waitrose stores in the UK is a “partner” who shares in the profits of a business that has annual gross sales of £11.5bn. The business is the people, and the employee share plan is an explicit recognition of this.
For employees, an increased sense of belonging is at the heart of a share plan. They now own a slice of the pie. An employee share plan represents something long term and employees are invested in the success of the business. Andrew Pendleton, Principal Director of Policy & Advocacy at the New Economics Foundation (NEF), makes the point that “Mutual fate is key… [share schemes] give workers more control but also a greater sense of responsibility”.
For the employer, the benefits include motivation and alignment of the employees’ interests with those of the business, talent attraction and retention.
The cooperative movement was founded on similar principles – offering a fairer deal for employees and, as a result, a more committed and dedicated workforce. Founding a business with cooperative principles can certainly create a culture of employee engagement.
But employee engagement doesn’t rest on ownership – there are other ways to build this culture. Take the example of the furniture retailer, IKEA. It has managed to build a brand with strong employee and customer engagement where staff are empowered as “co-workers” whatever their position and without any share scheme involved.
Turning around a flagging culture is the hardest job of all, of course. But that too can be done, with investment, leadership commitment, a strong and consistent message and, ideally, an innovative and emotive approach that really connects with your audience.
When we look at the campaign we ran for Unilever, we can see how important connecting with employees on an emotional level is. Although their campaign was to launch a new scheme, rather than change the culture, the same tenets hold true.
At an emotional level, share plans need to be transparent so that employees, regardless of seniority, can openly discuss ownership and recognise the value of being a stakeholder in the company. The degree to which a sense of belonging within the company is achieved is entirely dependent on its communication. Ultimately, as with so many things, the true value of employee share plans lies not in its financial incentives, but how it is communicated.
As reward communication specialists, Caburn Hope has partnered with organisations in many different fields to launch new incentive packages and systems, including employee share plans, and to build engagement in existing schemes.
If you’re considering launching an employee share plan or you’d like to increase engagement in the one you already offer, reach out to our team for expert advice and assistance.