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How to Educate and Prepare Your Employees for ESOP Success

Depending on the company, Employee Stock Ownerships Plans (ESOPs) often provide a great alternative to the traditional corporate structure.

Instituting an ESOP, however, may require owners to make changes to the way they do business. Information that was once private can become more public, and “sharing” becomes a regular corporate practice.

Under an ESOP, company employees will likely participate more, offer their input and know more about their company’s operations, revenues and profits than before.

Prior to transitioning to an ESOP, companies may want to consider educating their employees and creating a work environment that does the following:

Builds a “Workplace of We.” In ESOP companies, the lines between management and employees can become less defined. Thus, creating a collaborative environment and bringing accountability to all processes is essential. It is also important for employees to place a greater priority on customer service and fulfillment, as they take on increased responsibility for the company’s success and share in the stock value growth.

Encourages employee input. Many ESOP companies feature an open-door policy that provides employees with opportunities to air grievances without fear of recourse. Ideally, an ESOP should encourage employees to share ideas for improving productivity, processes, sales and more.

Offers employees financial training. An important step in transitioning to an ESOP, training new employee-owners ensures that they will be prepared for their new role. For example, because many ESOPs practice open-book management, employees may need to be educated in a range of financial concepts. Training can also help them understand how their own performance impacts the company’s financial picture, as well as how ESOP ownership could impact their individual retirement goals.

Encourages employee involvement. Don’t be afraid to ask employees to become more involved by inviting them to join an advisory committee. Additionally, consider ways to hold larger stakeholders accountable for improving operations and increasing profitability.

Communicates often with employees. Efficient employee communications help create a culture of sharing and community. ESOPs, however, should avoid overloading employees’ email inboxes just like any other company. Because ESOPs may foster new methods of operations, though, many firms decide to rely on a communications committee to create newsletters, send notices, oversee email blasts and spearhead company-wide events.

Moving to an ESOP management model is a significant event in the history of any company. Employee buy-in is helpful not only to the transition, but also to the future success of any ESOP company. Giving employees opportunities for input, involvement and education will ensure that the ESOP starts on a solid foundation.

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