Employee Ownership and Productivity
The term “Employee Ownership” refers to ownership of a company, by some or all of its employees. This can either be directly or indirectly and in part or in whole. Employee Stock Ownership Plan (ESOP) is an employee benefit program which enables the employees to become owners of the stocks of the company they work for. Companies offer shares to their employees because they believe being a shareholder of the firm would increase employee loyalty and motivation substantially.
Employee ownership has gained a lot of attention due to various reasons. Majority believes that it is possible to attain better economic performance of the organization through enhanced motivation and commitment which, in turn, is attained through the concept of employee ownership. According to a research from Kelly Services, more than half (53%) of UK workers said they would be more productive if they were able to share in profits or have an ownership stake in their employer’s business. People believe that the employee owners work harder and pay more attention to the quality of their work in comparison to non-owners. Social arguments for employee ownership are based on various parameters like its potential to broaden wealth distribution, enhance equitable distribution of economic profits, and to decrease labor-management conflict. The idea of employee ownership has also garnered support across the political spectrum. However, there have been many concerns regarding employee ownership, the major one being that it may expose workers to excessive risk and, in some cases, might increase labor-management conflict. The way people interpret ownership is very important and has a direct impact on company performance. It is therefore important for the leaders to identify what ownership means to the employees.
Managers like to believe that simply introducing ESOP would lead to the creation of an “ownership culture” within the organization. In this culture, managers and workers would always think of the company first when faced with any sort of problems in the course of their day-to-day activities. But in reality, there are various other factors which are at play in such a scenario. Some of these factors might be the difference in perception among managerial and non-managerial employees when it comes to employee ownership, differences in understanding the meaning of ownership, level of actual participation in decision-making and fairness of the plan. It was found that in companies where ESOP has been implemented, a vast disparity seems to exist between the sense of ownership felt by the managerial and the non-managerial employees. Managerial employees seem to take more easily and completely to the idea of ownership than their non-managerial counterparts. These “gaps” in understanding of the concept of ownership often lead to the ESOP plan being less effective than expected. This is often a direct result of brewing distrust and feeling of inequity caused due to this difference in perception.
Ownership Culture Survey(OCS) has revealed that fairness in the organization is of utmost importance among all mentioned parameters. Also, employees seem to pay more emphasis on participative decision making in day-to-day activities. Extensive research on employee ownership points to the fundamental relationship between participation in decision making processes by the employees and positive ESOP performance. If employees in ESOP organizations are allowed to take part in decision making, they would be able to apply their ownership motivations in a constructive manner. This shall also induce a sense of feeling of being more than passive shareholders. Following these, various participation technologies are being developed so that companies can effectively implement employee participation.
It may appear that regular efforts from company leadership would be sufficient to satisfy employees’ interest and create an ownership culture. But, most of these activities are one-way, top-down messages from management. Hence, there is enough reason to doubt the effectiveness and the long lasting nature of these activities. The monopoly at the top regarding practices of ownership must end. Managers and workers must learn the sharing of these core principles.
A strong correlation has been found to exist between the sense of ownership and level of self-direction. It has been found that employees with a sense of autonomy, of participation, and of influence tend to feel more like owners and hence are more likely to be motivated.
Employee Ownership has its own advantages. In firms practicing employee ownership, managers try to maintain a high commitment workplace, and employees exert pressures to increase job security. Today, employees are aware that an increase in their own individual effort at work is not enough. This, in turn, leads to teamwork.
The perfect recipe for success is to realize that financial aspect of ownership is not the only priority. Various other aspects of ownership, which we call “the culture effect”, play a very vital role. The culture effect results from psychological ownership, and exists only in the companies which actively nurture a sense of ownership in the employees. An ownership culture has multiple dimensions like access to information, participative decision making, and a sense of organizational fairness. Each of these dimensions strikes a balance between the employees’ rights and the responsibilities they accept. The incentive effect is necessary, but the culture effect is the main reason behind the real power of employee ownership.
Though employee ownership provides a distinct solution to the incentive problem, it has to deal with problems like participation and free riding. Employee ownership has positive effects on the employees if they perceive that it helps in bringing greater income, control over jobs and job security. On the contrary, it may have negative effects if employees do not perceive any difference in their work lives, have unfulfilled expectations or dislike the extra risk to their income.
The writer, Siddharth Chhottray, is currently pursuing PGDM at T A Pai Management Institute / TAPMI (2010-2012) and is an alumnus of BITS, Pilani (Goa- Class of 2009)
Email : siddharth.12@tapmi.edu.in
Samir 
ramalingam 
Farhaan 
siddharth 
susan 
