Alignment: The Power of Employee Ownership

For years, business leaders and management professionals have sought a sort of holy grail of employee involvement, a way to tightly align the interests of employees with those of the business.

Too often they missed an answer that was hiding in plain sight: employee ownership.

In employee owned businesses, everyone shares in the rewards when the business prospers—which means everyone has reason to care about the businesses’ performance. And that more readily puts everyone on the same page.

One outcome is that employee owners are more likely to intercede when their co-workers are not performing up to expected norms, according to data gleaned from the General Social Survey* (GSS). Consider that for a moment: Many people (perhaps most) people would rather avoid a conflict than engage in one, and no one would engage in a potential conflict over something they care nothing about.

The fact that employee owners are willing to address a co-worker who isn’t up to snuff means they care. And why shouldn’t they? If their colleagues aren’t performing well, they risk losing out on the shared rewards available to everyone.

Just as importantly, consider what might happen when a colleague—rather than a supervisor or manager—initiates this kind of conversation. Because a conversation with a co-worker brings no imminent threat of negative performance ratings or other discipline—as it might with a boss—it might engender a less defensive reaction.

What’s more, a co-worker—especially one who works in a similar or even identical role—may be able to suggest options for working faster or better based on practical, every day experience. And the person receiving that advice might be more inclined to listen because everyone—including the person being addressed—stands to gain if work can be done better or more efficiently.

Now think about the effect on management if co-workers take an active part in improving the performance of a team. How much time and effort might that free up for managers, who can devote their energies to other ways of improving the business?

Could this same chain of events happen in a conventionally owned business? Of course, it could. But does it? Not according to the GSS research. The reason for that is pretty clear: In conventionally owned businesses, employees have no real incentive to initiate this kind of conversation. After all, they get paid the same amount whether the people around them do their jobs or not.

That kind of response is all too common, and it is why management gurus have been seeking a way to gain greater alignment between employees and businesses.

The answer is there: Make employees owner and have them share in the rewards, and everyone has an interest in improved performance—both individual and collective.

*The GSS is the single best source for U.S. sociological data, and the results on employee ownership were gathered thanks to funding from the Employee Ownership Foundation.