Share and Share Alike: From Formation to Fresh Perspective

Empowering employees, by giving them a stake in your company, results in a motivated and committed workforce, correct? The theory seems simple. In today’s post, Companies Made Simple investigates the concept of share initiatives as an effective leadership tool. The next post will give you some practical advice on how to ensure the process is mutually beneficial.

It is a widely accepted theory, that happy and motivated staff perform better, stay in their roles longer and therefore enhance the operation and profitability of a company. Whole disciplines and strategies have been devised to tackle the issue of staff motivation, all of which come at a great cost to the employer and yet most SMEs are happy to pay. However, despite committing to most staff motivational strategies, share ownership has been widely regarded with apprehension by the SME sector. Historically, it has been perceived as a complex and potentially dangerous strategy, best suited to larger corporations where margins are bigger and structures are in place to ensure staff do not become ineffective due to the pressure of extra reasonability.

However, in the current economic climate, business owners are constantly looking for ways to increase staff retention and morale that are not at odds with their profit imperative. Therefore, according to Matthew Pearson, CEO of Pearson Innovation, the number of SME’s implementing a share ownership scheme has increased. “In the current economic context, small businesses are looking for different ways of securing staff loyalty and motivation.”

The recession demands that small businesses stay at the top of their game and good staff are absolutely vital. Therefore, many SME business owners are looking to give employees a share in the company they formed to instill a mentality whereby staff don’t just see a 9-5 job when they look at the company they work for, but a platform for a better future for them personally.

Keeping hold of good staff was one of the main reasons Pearson offered staff an Enterprise Management Incentive at the beginning of 2008. “Employees were empowered; they began to see themselves as part of the company’s future and subsequently morale increased and so did profitability.”

Right from the beginning of the company formation process, Pearson’s main objective was that his company would grow without having to sacrifice equity to external parties. “Interestingly, I didn’t feel the same way about giving equity to employees” he explains. “And as the company continues to expand, I eventually want to be in a position where employees own 10% of shares. That way I hope staff will be fully engaged in the brand they helped create and we have created a corporate culture where every single employee is completely passionate about the company’s direction and future growth.”