Are Employee Owners More Engaged?

Among the incentives employers provide are stock incentive programs.  The thinking is simple—if someone is an owner of a company (no matter how small) they’ll act in a way that is more beneficial to the enterprise.  With startups, it’s a bit of a gamble (take less cash up front, but if this thing takes off you’ll be rich) and with more established ones it probably helps stabilize the stock price.  But does this incentive lead to better organizational outcomes?
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Most of the available data says yes in the sense that companies that offer these types of programs out perform those that don’t.  However, correlation is not causation.  It is probably only companies that are already doing well that make this type of incentive available.  Also, in high tech and bio tech they have come to be expected, so they probably don’t work as motivators.

What is interesting, and probably effective, is the psychological aspect of begin an owner.  Except in small companies, an employee is rarely going to see the direct affects of his efforts on the bottom line.  But, having an ownership position, no matter how small, does invite more engagement.  A perfect example is with the Green Bay Packers football team.  The team offers stock to its fans, but it’s essentially worthless.  But, when it’s offered it sells so that fans feel that they have ownership in the team.

The idea of “owning” one’s work or destiny is a powerful one.  In change management we often speak of authoring or owning change.  Having ownership feeds into our need for autonomy, or control over our destiny.  Whether it is through owning stock or having meaningful input into work product, we want to be able to say, “I did this so I could impact an outcome.”  And that is important, regardless of whether the outcome is a stock price or how the widgets get engineered.

This is a powerful incentive to be used by management, but it involves each level giving up a bit of its own ownership position.  But, some executives, such as at Chobani think it is worth it.

When More is Worse

In every organization you need to strike a balance between implementing good processes and getting things done quickly.  In that sense, recruitment and selection are no different than any other logistics activity.

This article has some one person’s opinions and insights and into problems the U.N. has in how they hire and manage people (among other things).  Obviously, the U.N. has special challenges in terms of security, but an average 213 days to recruit someone for any job is ridiculous.  And, remember, half of the positions take longer.  One can only imagine the use of the same process to hire a grant manager, administrative assistant, and field doctor.
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All hiring is a risk analysis.  What are the odds that this person will work out (not that you can improve them with validation selection tools)?  Call centers and retail always have to balance opportunity costs of having an open position rather than filing it will a less than ideal candidate.

Another issue is the long term cost of having an underperforming employee.  Many organizations, apparently including the UN, do such a poor job of performance management that a bad hire is expensive for a long time.  Again, a case of far too much process getting in the way of achieving organizational performance.

But, things can change.  GE has made a big bet on data.  So much that they are getting out of some of their traditional businesses to focus on it.  What I liked about this article was how they worked from business need (how can we recruit more software engineers?) to their HR processes (OK, we’ll make this change so we can attract more).  Of course, they’re a big company with big legacy processes and I’m sure the article makes it sound a lot easier than it was.  But, they are making it happen.

For more information on making your HR process work for you, contact Warren Bobrow.

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