The Point: Whether you run a large, or a small organization you will sooner or later be faced with an ownership dilemma as follows: Should I allow those that participate with me in the venture to gain an interest in the venture? In this post we’ll explore employee ownership and whether or not it’s right to disburse ownership to those that join you in your leadership journey along with three tips… Enjoy!
Employee Stock Ownership Programs (ESOP)
Meet Bob… Bob has successfully run his organization from initial start-up phase through ideation/creation and ultimately lift-off (All successful I might add!) The organization is flooded with his blood/sweat/tears along that path. Bob recognized something early, that being he could not get to “there” (The “there” he wanted to be according to his business plan) without recruiting others to assist him. So he recruited successfully as part of that business plan and achieved what most would consider success. However, there came a time when Bob was faced with an employee dilemma… Should he give up a “piece of the rock” of ownership a la the Prudential advertising slogans of old and provide a piece of the ownership puzzle to those that accompanied him on said journey?
Because They Are With You, Do They Deserve Ownership?
Employee Stock Ownership Programs typically provide ownership interest in the form of equity to employees (Typically with no upfront costs associated, as a form of employees remuneration for work performed). While this is a gracious, and often golden-parachute for employee ownership interest in luau of cash compensation, it typically isn’t predetermined by most entrepreneurs.
The Prudential Problem: Three Tips!
The following leadership challenge discusses the topic of providing ownership interest for associates and provides consideration topics to insure that this is the best course forward:
The Prudential Problem #3 – Are They Equal Owners?
The first problem to identify is whether or not employees act as equal owners to that of original leadership within the organization. While there is considerable risk involved in starting an organization (ideation alone that results in creative innovation could spell the different between success/failure), stakeholders typically come to an organization that has well established paths forward towards profit.
But what if your organization doesn’t have such well established paths forward towards profit? What if there is a need for differentiation of thought and pivots therein based on consumer preference? Are there new ideas brought to the forefront which could establish ownership mentality?
The Prudential Problem #2 – Should They Receive Ownership Interest?
If new ideas are brought successfully to the forefront of organization direction to accomplish organizational mission/vision, at what level should ownership be distributed?
Given that there is such ownership mentality present is it fair to those employees that provide such direction a certain percentage? What will happen to those employees that do not provide such direction, yet are afforded the opportunity to act/carry-out such processes?
The Prudential Problem #1 – What if They Don’t Deserve Ownership Interest?
If the ideation and carry-out of such processes leads you to believe that ownership interest is deserved, then certainly a percentage of ownership could be made a case for distribution. Identifying who will receive what percentage and in what format (Current equity valuation versus future) could be justified.
My perspective is that those that provide ownership mentality and carry-out such direction may deserve equity distributions. Identifying therein the levels required to maintain not only current, but future, interest is often dictated by the equity levels provided.
In this post we’ve analyzed the leadership challenge of the Prudential Problem of giving up a piece of ownership equity in order to further the organizational mission, along with three tips to provide insight into the dilemma at hand. If you’re like Bob (and sooner or later you will be), the dilemma could/will be indicative of future strategic business moves you will face. Make the right moves, and the organization may continue on its success course. Make the wrong moves, and the organization could fade away into oblivion (or somewhere in-between).