Sustainability has been a hot topic in the ESOP community over the course of the past several months in light of the global pandemic we are currently experiencing. Often, the sustainability conversation leans toward technical aspects and focuses on subject matters such as revenue, profitability, cash flow and repurchase obligation. However, a much larger discussion – regarding the sustainability of our workforce – also needs to take place. In this article, we discuss factors such as the importance of information sharing, how to achieve organizational and employee resilience, and how to motivate millennials, currently the largest sector of the workforce. All of these are important facets of creating engaged and motivated workers who will help a company – especially an ESOP-owned company – create a sustainable workforce.
The Power of Information
Participants in ESOPs typically have one of three views when it comes to their stake in the company: they have an ownership mentality, which leads them to think and behave like an owner; they are uninterested and simply view their job as a place to earn a paycheck; or they view employee-ownership from a societal perspective, which leads them to believe they are a part of something that is bigger than they are.
Generally, ESOP companies have at least some employees that embrace each of these views, and, regardless of the mix you may have at your own company, we have found that the most successful companies are able to teach all three types of employees how their own behaviors impact the valuation of the business. A critical way that companies can achieve this is by sharing information with their employees.
When sharing information, ESOP companies should consider disclosing information that is most relevant to what an employee does. For instance, salespeople need to know sales information, whereas individuals involved in production might benefit from learning the number of units produced in a single day. Managers should share what the employees need to know so that they can connect what they do on a daily basis with what can make the most difference in the bottom line of the company.
Moreover, regardless of the employee’s role within the firm, sharing basic information from the company’s financial statements is another critical component of this process. Financial statements tell the story of your company – not only to banks, investors and valuation professionals but also to employees. While some managers feel that it may be difficult to relay financial information to employees because they may not understand them fully, most employees do not need to understand how to read each detailed financial statement in order to learn the basics about the company’s performance. Not everyone is an accountant, and they do not need to be.
One way to approach relaying financial statement information to a broad employee base is by comparing actual performance for the year to budgeted performance. In addition, managers can describe actual versus budgeted performance over a five- or 10-year period and explain to the employees what occurred during each of those years to influence the numbers. For instance, certain initiatives may have been implemented to positively drive business one year as opposed to economic or industry challenges that occurred in another year that negatively affected business. As this information is relayed, employees will be able to start comprehending what impact they have on the company.
Recently, many organizations have experienced enormous challenges that have forced them to formulate strategies that will either allow them to rebound or begin on an entirely different path. According to Cathy Ivancic of Workplace Development, when major change happens, managers and employees go through four predictable steps: denial, resistance, exploration and commitment.
When an organization faces a challenging situation, the first reaction is often denial that the situation is happening. Then, when workers are asked to do certain tasks to adjust to the change, they are often resistant. However, when they reframe the change as an opportunity, they move from the resistance stage into the exploration stage where new ways to approach the challenge are developed. Finally, once exploration is complete, employees move into the commitment phase, at which time they have adjusted to the change and are ready to move forward. Overall, leaders have to move through these four steps at a much quicker pace than employees. Ivancic says that “it’s one of the characteristics of people in leadership positions, particularly executives, that they can move themselves quickly to exploration.”
Notably, Ivancic says that it is a myth that some organizations are strong and resilient while others are not. Indeed, Ivancic is of the firm belief that organizational resilience can be cultivated. When a challenging event occurs – such as a pandemic or a downturn in the economy – companies often have to make immediate changes in how they service their customers. At the same time, organizations feel that their circle of influence (a concept that comes from Stephen Covey’s book The 7 Habits of Highly Effective People) shrinks during challenging events. Resilient organizations look to how they can expand their circle of influence during these occasions. They do this by focusing on their purpose, creating new pathways to achieving their purpose, cultivating strong relationships and turning disruptions into opportunities.
In addition, resilient organizations do not protect their employees from bad news. Ivancic notes that “protecting is not helpful.” Instead, she encourages managers to “help people figure out what they can control and be real.” Moreover, it can benefit organizations to remind employees that the business has been through challenges before and is nevertheless still around. The historical challenges might have been major disruptions such as the Great Recession or 9/11 and its aftermath, or they could have been disruptions at either the company or industry level. In any case, resilient companies focus their employees on the fact that the company has been through stressful times before and has succeeded nonetheless due to hard work and persistence.
Moreover, resilient companies focus on reinforcing their communication and culture during challenging times. With ESOP companies, utilizing the firm’s communications committee to facilitate events and competitions – even if they are virtual – can do wonders to boost morale and enhance resilience.
Motivating the Millennial Workforce
One of the growing areas of the workforce is the millennial generation, which is defined by Pew Research as those born between 1981 and 1996. Notably, as of 2019, millennials overtook their parents’ generation – the Baby Boomers (born between 1946 and 1964) – as the country’s largest. Additionally, millennials’ share of the U.S. workforce is also the largest; indeed, the generation took that lead in 2016, at which time they accounted for approximately 35.0% of the workforce.
Generally, there are a number of characteristics that apply to the millennial generation. On one hand, millennials tend to be idealistic and enthusiastic; are self-directed learners; have an appreciation for diversity; are open-minded and innovative; are technology-savvy; and are responsive to feedback. At the same time, though, many suffer from fragile self-esteem; do not tend to value traditional workplace rules; are interested in “hacks” rather than implementing long-utilized processes; and are seen as having a lack of loyalty.
When it comes to motivating millennials in the workplace, managers should be aware of these characteristics so that they can play to millennials’ strengths and help minimize the impact of their challenges. For example, because millennials are self-directed learners who are creative in how they execute their work, it may be helpful to find opportunities to give them some responsibility and autonomy early on in their careers. As an example, since most millennials are able to find solutions to technology problems more easily than others in older generations, putting them on a team that is working to solve a technology issue may help them feel successful, thereby helping the organization gain their loyalty.
Moreover, managers can provide frequent coaching and feedback to millennials. Due to the “trophy culture” that dominated their younger years, millennials have been conditioned to receive consistent feedback – even when they are doing a good job; therefore, they expect feedback on all projects. According to Bill Dunn, a millennial and an associate at Prairie Capital Advisors, this feedback is best delivered through coaching as opposed to a report card-like list of positive and negative attributes.
Other ways managers can motivate millennials are by showing sensitivity to their needs; providing a clearly defined path for advancement within the organization; and explaining the organization’s values and the company’s impact on society.
Specifically, with regard to ESOPs and millennials, Dunn suggests that one of the ways to connect the ESOP and company’s value drivers is to “leverage millennials’ abilities to learn with technology. So, give them the resources they might need to educate themselves so that they can understand the value of the ESOP and finance better.” Using self-directed, technology-focused resources, millennials can better understand important concepts such as revenue, gross profit and EBITDA and what they mean organizationally. In addition, ESOP companies should make sure to explain to millennials the positive societal value of ESOPs.
For more detailed information on these topics, please view our webinar entitled Ownership Culture: Employee Resilience and Motivating the Millennial Workforce which can be viewed here.
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