Every industry is poised to capture the power of employee ownership and participation. However, the hospitality industry, given the proximity of employees to customers, has a particularly powerful opportunity to harness employee ownership and participation.
In short, ownership gives employees an interest in their company and its success beyond a paycheck; participative management channels that interest into action.
Having worked for the National Center for Employee Ownerhsip (NCEO) for several years, I had the opportunity to reserach and interview companies making headway with employee ownership and particpative management.
Participative (or participatory) management, otherwise known as employee involvement orparticipative decision making, encourages the involvement of stakeholders at all levels of an organization in the analysis of problems, development of strategies, and implementation of solutions.
Below is an excerpt from an interview with the founder of NCEO, Corey Rosen and ESOP Marketplace.
One of the first big things we found out was that corporate size, industry, demographics of employees – it doesn’t matter if they’re young, old, highly educated, poorly educated, high income, low income – it doesn’t matter what kind of job they do, none of these things independently affect the success of an ESOP.
Q: So what does (affect the success of an ESOP)?
Three things. First, you have to make enough contributions to an ESOP, so that it’s meaningful to people. Second, you need to communicate it well enough so that people actually understand what they’re getting. And the third, most important and hardest, you need to create a high involvement, open-book culture.
These are companies that share a lot of financial information and other corporate performance information with employees. They tend to devolve a lot of authority to employees in terms of things like employee teams, self-managing groups, and ad hoc committees. Ther approach is that, management is going to make many fewer decisions and employees more about how work is done.
It doesn’t make what business you’re in, if you can get people engaged at that level, where they understand the business, understand how the business makes money, and have opportunities to translate that understanding into ideas on how to improve the business – you’re going to make a lot more money.
After leaving the NCEO I was hired by a mid-size manfuacturing firm to impact the ownership culture of the company. I didn’t have management experience but I did have sufficient examples of how successful employee ownerhsip companies involve employees and a genuine respect for each indivdual and the value they bring to the company. I was positioned in a customer service/team leader position so that I had daily contact with the manfucatuirng employees and customers on a daily basis. The first thing I did each morning was go out onto the shop floor and talk to the machine operators to find out what happened during night shift (their counterparts would pass on the night’s highlights) and see if any material had been marked as potentially nonconforming. I would visit night shift before leaving for the day as well.
Just providing daily commincations opportunities created an open dialogue about what was working, what wasn’t and employees were given a chance to have their ideas heard about what could make things work better. Who better to comment on and influence daily operations than the people at the front lines everyday?
Another benefit of this daily dialoge was an opportunity to give employees feedback on how their work was received. The most common question posed to me by operators was always, “Was the customer happy with my work?”
There were other opportunites to connect these employees, who worked hard every day but were in the background, with customers. One method I used was biographies about our employee owners that were mailed to customers. In addition, management invited customers to the plant to hear presentations by employee owners on various aspects of the company.
Extra work? Indeed. A team leader’s presence is by no means the only connection that matters. Top management must be seen and heard as well. The culture goes to the top. However, it also doesn’t take a rocket scientist to makes these things happen. Participative management can offer many benefits such as ensuring that quality issues come to the fore and get addressed, boosting motivation, improving communication, and creating avenues so that each employee owner is able to help grow a bigger pie.
This is great news for hospitality. Employees can make a big impact given their close contact with customers. In addition, an ownership stake can help retain employees, who often leave in their thirties in search of better wages and more stable employment. This means not having to retrain a new, young workforce over and over.
If you are too small to consider an ESOP, profit sharing is just as powerful.
The link below shows a table on the main differences between ESOPS, profit sharing plans and stock bonus plans.
For more information on employee ownerhsip and participation visit The National Center for Employee Ownership.
NCEO offers affordable publications, workshops and conferences on employee ownership and participation as well as referrals to advisors and lenders. The NCEO can assist you every step of the way.