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BizVoiceExtra: Employee Owners are Good for Business

2018-12-05T17:23:48+00:00December 7th, 2018|

A well-rounded benefits package, flexible work schedules, training and education assistance, competitive salaries. Employers know these things help attract and retain top talent. But what can businesses do to boost productivity? Strengthen employee engagement? Enhance the organization’s longevity and success?

Two Chamber members celebrating big anniversaries this year have something in common that their experience – and research – shows helps with these intangibles.

Both Nyhart with 75 years in business and SYM Financial Advisors at 50 started as family businesses that later transitioned to employee ownership.

Common sense seems to dictate that if you are going to directly benefit from your efforts, you’re more likely to do your best. And if your teammates’ outcomes affect your financial future, you’re more likely to help them do their best too.

After Nyhart CEO Lisa Hague mentioned that the consulting, actuarial and administration services business was different than probably 99% of the other companies because of its employee stock ownership plan (ESOP), I wondered:

  1. What percentage of businesses are structured this way?
  2. Does employee ownership boost company performance?

Here’s what the numbers and research show.

First, looking at the percentage of businesses with ESOPS:

Only .11% of U.S. firms have an ESOP, with an estimated 30% to 40% of those wholly employee owned, bringing the percentage even lower, according to 2015 numbers from the U.S. Census Bureau Statistics of U.S. Businesses and the National Center for Employee Ownership (NCEO). (Indiana has 108,558 firms with 176 ESOPs, for a slightly higher percentage of .16%.)

As for the impact on business performance, the NCEO has a handy chart summarizing related research studies and an explanatory article about employee ownership and corporate performance. To share a few performance indicators, businesses with ESOPs combined with participatory management experience:

  • Positive impact on sales growth, employment growth and productivity for private companies (compared to similar non-ESOP companies)
  • Greater return on assets, better net profit margins, higher return on equity and increased company value for public companies
  • Somewhat more likely to be in business longer

ESOPs also help the employees. Millennials report higher median wages and higher net household worth as well as access to benefits and retirement assets if they are in a plan. Workers of color, low-income workers and single parents also have substantially better outcomes.

With 100% employee ownership, Nyhart’s ESOP shapes the workplace culture.  From the CEO on down, workers also credit it with the company’s success. SYM’s team of employee owners has grown during the last 12 years, from a handful to 12.

When I asked SYM CEO Jerry Yeager what he attributes the company’s longevity to, its keys to success that have enabled it to grow and continue to do well, he points to successfully navigating the change to employee ownership.

“One of them is primarily surviving the transition from the first generation to the second generation,” he notes, sharing that at the all-company anniversary celebration his dad, one of the two founders, talked about how hard it is to make that transition and that a lot of companies just don’t survive it.

But for those that do, it’s clear an employee ownership structure can be a win-win arrangement.

Find out more about the Nyhart and SYM Financial Advisors.

Crickett Gibbons is the communications specialist for the Indiana Chamber. She is also a writer for the Chamber’s award-winning BizVoice magazine and has been with the organization a year.