5 Key Traits of Successful Employee Share Ownership Plans

Imagine if your employees were as focused, driven, and motivated about your business as you are – imagine if they came up with new ideas and cost savings regularly and imagine if they were as interested in profit as you. Sounds like Utopia but it is possible and in fact it is happening with businesses that effectively use Employee Share Ownership Plans.

The research tells us that businesses that combine employee ownership with a participative management style grow 8-11% per year faster than they otherwise would have.

Employee Share Ownership Plans are a great way to:

• Attract, retain and motivate key employees.
• Improve business performance – profitability, staff retention, productivity.
• Build an internal succession plan for staff and business owners.

“Employee ownership is a different way of thinking about business. It targets long-term sustainability by recognising that employee/owners are more committed to developing innovative products and processes. The result is competitive advantage and lasting success – in good times and bad.” 
– Sir Stuart Hampson, Former Chair of the John Lewis Partnership, the largest ESOP in the world with over 80,000 employees in the plan

There is no one-size-fits-all structure and designing an appropriate ESOP will involve consideration of your businesses current performance. In any case, the following simple rules should apply to successful Employee Share Ownership Plans:

1. Be Simple – well thought out and easy for all staff to understand
2. Be Applicable – applies to all staff consistently (although you can choose to offer greater reward to particular levels or staff or for particular relevant outcomes for which employees have control)
3. Be Transparent – communicated clearly and without ambiguity. All performance indicators must be able to be measured objectively and progress communicated regularly
4. Be Reliable – once communicated, should not change often
5. Be Supported – the system must be supported by all company owners, board and management

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.