Employee ownership is not a new concept, but it is attracting renewed attention from pundits and policymakers who argue that it benefits workers, companies, and communities.
At Teamshares, we’re on a mission to make employee ownership the future of small business, because we think every worker should be able to benefit from what they’ve help build. That’s why we’ve created a model to convert small businesses all over the country to employee ownership when the owner retires.
Today, there are successful employee-owned businesses of all sizes and across all sectors, including 80+ small businesses across 29 states and 40 industries in the Teamshares Network. These companies offer new opportunities and benefits for job seekers.
But what are the benefits of working at an employee-owned company? In this post, we’ll dig into the data around the benefits of employee ownership for employees, businesses, and communities, and give some general advice for job seekers who may be considering a move to an employee-owned business.
The benefits of employee ownership
In the United States, employee ownership is a growing movement that provides benefits for employees, owners, businesses, and communities alike. As of 2018, over 19% of American employees “owned some share in their employer,” according to a Rutgers University analysis, and a 2022 Morgan Stanley at Work study on trends in employee compensation shows that offering equity is a key strategy for attracting and retaining top talent.
Employee ownership comes with many substantive perks, ranging from financial benefits to cultural and psychological impacts. Below, we unpack these benefits and how they impact different company stakeholders.
Employee ownership benefits for employees
“It’s made me, and I hope others, realize what a large stake we hold in the success of our company,” said Ricki S., an employee owner at a Teamshares Network Company. “If we perform better, our company does better. And that benefits each of us.”
Ricki’s comment nicely summarizes the dual impacts of employee ownership for employees. Employee ownership not only provides monetary benefits, but it also inspires a deeper level of connection and meaning in everyday work.
Increased sense of ownership
For years, research has demonstrated that self-employed people are more satisfied with their jobs than typical workers, because they have a greater sense of control over their work. Employee ownership extends this benefit to all employees by allowing them to share in the responsibilities and opportunities of ownership.
This increased sense of ownership is inspiring to employees at all levels, as they get involved with other aspects of the business and sense their contributions really matter to the company’s—and their own—bottom line. For example, Teamshares Network companies are led by a strong generalist president who regularly seeks the input and expertise of employee owners when it comes to critical business decisions.
When their input is solicited and respected, employee owners feel more dedicated to their work, their company, and more responsible for the culture of their workplace.
Working at an employee-owned company has financial benefits in both the short and long-term. As an owner, you can expect to share in some portion of the business’s profits.
Of course, the models for this vary across businesses, so you’ll have to evaluate the offer you receive to understand the exact scope of your ownership rights and responsibilities. But in general, employee owners can expect to be financially compensated in the short-term in one of two ways: equity or bonus payments.
Employee owners typically own equity in a company, meaning they own a portion of the company’s stock. If you are an equity owner, and the company is doing well, you can sometimes expect to receive regular cash payments called dividends, in addition to building long-term stock value.
These payments are usually distributed quarterly, although the schedule is at the discretion of the company, and represent the portion of the company’s profits that are commensurate with your own ownership percentage.
For example, if Company A is planning to distribute $50,000 of profit to employee owners in the form of dividends, and you own 1% equity in the company, you will receive a $500 dividend payment.
While dividends are by far the most common short-term financial reward for employee owners, some companies employ other profit sharing structures. These can include bonus payments or deferred payments in the form of equity grants or bonds.
Long-term financial security
Employee ownership is also an investment in your future. At retirement, employee owners who own equity can sell their shares in the company for a bulk sum based on the company’s current valuation.
If your company is successful and has grown over the course of your career, you can expect that the value of your equity will also grow. For many employee owners, this equity buyback payment is a primary source of retirement income.
This buyback option is a much-needed financial benefit for employees who make their careers at businesses or in industries that don’t offer more typical retirement benefits like 401k or deferred compensation plans.
At Teamshares, we’re dedicated to bringing these innovative benefits into industries where they aren’t typically offered through employee ownership.
Know a small business that may be a fit for Teamshares?
In addition to the monetary benefits for employees, employee ownership also comes with many cultural benefits. As an employee owner, you often can expect to have more insight into how your company operates.
Governance models vary depending on the company, but employee owners can generally expect to have some level of transparency around the company’s financial performance and general insight into the company’s operations.
Understanding the company’s overall direction and performance—and the factors that influence them—can change the way employees approach their own day-to-day work. In many cases, this level of agency translates into innovation on the employee level.
When you know more about the business beyond your immediate role, and you understand the things that make a meaningful difference in the company’s bottom line, you have the information and incentive you need to find efficiencies and opportunities in your day-to-day workflow.
Employee ownership benefits for businesses
In addition to the benefits for employees, businesses and their majority owners greatly benefit from the transition to employee ownership through the three P’s:
- Better performance
- More productivity
- Increased profit
Research has revealed that worker owned companies are more resilient in the face of economic volatility, which helps both workers and organizations ride out downturns.
Employee ownership also makes for a more productive, stable and economically secure workforce, which is critical now more than ever. In addition, employee-owned companies grow faster and are more profitable than comparable businesses that are not employee-owned.
One important benefit of employee ownership is that it aligns the incentives of everyone at the company—majority owners and employee owners alike. Because when you work for an employee owned company, you directly benefit when the company succeeds.
Incentives, particularly economic incentives, have long been used to motivate employee performance. Having a real stake in the business’s success makes employees perform better.
An ownership mentality also encourages a different kind of performance from employee owners, who become problem solvers on behalf of the business.
“Employees find more creative ways to produce results when they understand the ultimate goal for the company,” Kevin Cui, President of MAN Marketing, a Teamshares Network Company, told Authority Magazine.
“Some of our salespeople may make more calls, while others may reach out to lapsed clients or find ways to trim costs, but they ultimately all increase profitability and service for our clients.”
Employee-owned businesses also enjoy cultural benefits that make them an attractive workplace for prospective talent. As mentioned, workers with an ownership stake are more satisfied in their jobs.
Employee ownership also improves interpersonal relationships in the workplace by creating more equity among the workforce.
According to research by the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers School of Management and Labor Relations, “expanding access to employee ownership can increase equity of opportunity to build wealth and address wealth divides.”
When everyone is an owner and feels their role is valued and respected, relationships among colleagues change for the better. Frank D., an employee owner at a Teamshares Network Company, said it best.
“We have a responsibility to each other to do a better job—to do a great job— in order to produce better outcomes and finished products. The payoffs manifest themselves in both larger dividends and better, more supportive relationships with each other. We should care more about each other in all ways, as we are all part of the mission.”
Finally, employee ownership fosters a sense of belonging that redounds to the benefit of both individuals and the collective organization.
A Harvard Business Review study revealed that 40% of people say that they feel isolated at work, leading to lower organizational commitment and engagement. The same study found that when workers have a sense of belonging, the business performs better.
“If workers feel like they belong, companies reap substantial bottom-line benefits. High belonging was linked to a whopping 56% increase in job performance, a 50% drop in turnover risk, and a 75% reduction in sick days.”
At Teamshares, we’re on a mission to put $10 billion of stock wealth in the hands of hard-working individuals and help generations of small business owners retire confidently.
Helping average workers build wealth through ownership has many downstream benefits for communities, including desirable employment opportunities, vibrant local economies, and more resilient businesses.
Employee-owned companies benefit employees, companies and communities on many levels. If you are a business owner or employee who thinks your small business would benefit from a transition to employee ownership, get in touch with Teamshares.